Houston-based AFGlobal Corp. (Ameriforge Group) recently filed for Chapter 11 bankruptcy protection and formally announced it has entered into a restructuring support agreement (RSA) with majority support from its senior lenders. It also has launched a solicitation for a pre-packaged reorganization plan that will substantially reduce AFGlobal's debt service obligations and position it for long-term success.
“We took the opportunity to reorganize the company under this filing and as a result, we have a new infusion of funding to drive the company forward and build on our technology platform,” AFGlobal Director of Marketing and Communications Christine Mathers told Supply House Times.
Brandy Chetsas, who reports on bankruptcy cases for the website BankruptcyData.com, explained to Supply House Times the Chapter 11 filing was initiated in order to make an RSA possible through the company’s prepackaged plan of reorganization.
In the Chapter 11 filing with the United States Bankruptcy Court Southern District of Texas Houston Division, AFGlobal wrote:
“In the months and years leading up to their decision to seek relief under Chapter 11 of the Bankruptcy Code, the debtors faced a number of economic hurdles. The difficulties faced by the Company are consistent with those impacting the oil and gas industry more broadly. Beginning in 2014 and continuing through 2016, the oil and gas market experienced a significant oversupply of capacity leading to a substantial and rapid decline in oil prices. This in turn resulted in significantly lower activity by the company’s customers, manifesting into lower revenues and losses. Lower steel prices and declining international demand for industrial products also resulted in lower activity from the company’s distributors.
“This prolonged downturn in commodity prices only exacerbated the company’s legacy capital structure, which was intended to support a much larger company before the company began streamlining its business with strategic divestitures.”
AFGlobal added in the filing: “The company did not immediately seek to file a Chapter 11 proceeding after experiencing the liquidity constraints caused by, among other things, the severe and prolonged downturn in commodity prices. Instead, the company took measures to preserve its liquidity, including through workforce reductions, monetization of slow-moving inventories, contract termination, facility closures, the removal of excess machinery and equipment, and divestiture of non-core businesses. Cognizant that these efforts alone might not be enough to avoid a “going concern” qualification in the company’s annual financial statement, the Company engaged in discussions with certain of their first and second lien lenders to negotiate a consensual restructuring.”
According to the filing, the financial restructuring contemplated by the plan will de-lever the AFGlobal’s balance sheet by about 680 million — more than 90% of its funded debt — and “position its business for long-term success and growth upon emergence.”
The restructuring process is expected to conclude in about 45 days and the company's business continues to operate as normal. During the process, AFGlobal will receive substantial interim funds to ensure business continuity as well as long-term liquidity, the company added.
"Restructuring activities are underway to support our growing oil and gas business, alleviating the company of its unsustainable debt, given current market conditions", said Curtis Samford, president and CEO of AFGlobal. "Retiring past debt will enable us to more efficiently continue on our path toward building next-generation technologies that support the next phase of drilling and production in our industry. "We greatly appreciate the support offered by our senior lenders as well as the infusion of new capital."
Kirkland & Ellis, Lazard Frères & Co., and Alvarez & Marsal are serving as the company's legal advisor, financial advisor and restructuring advisor, respectively.
Parties seeking additional information related to the reorganization may call 888-752-1027 (U.S.) or 503-597-7695 (international) or visit http://dm.epiq11.com/ameriforge.
AFGlobal is an oil and gas OEM specializing in technology, products and services with fully-integrated manufacturing capabilities to clients around the world. It aligns well-established precision engineering with industry-leading innovation.
AFGlobal also offers a broad range of manufacturing capabilities to industrial segments, offering a variety of both highly-engineered and general forged products, as well as complementary aftermarket services. Headquartered in Houston, Texas, AFGlobal has more than 20 facilities worldwide.