ModSpace Announces Financial Restructuring
$400 Million of Debt to be Eliminated;
Capital Infusion of $90 Million; New $719 Million Credit Facility
No Impact or Impairment to Employees, Customers and Vendors
BERWYN, Pa., December 21, 2016—Modular Space Corporation (“ModSpace” or “Company”) today announced that it has entered into a comprehensive financial restructuring agreement (the “Restructuring”) with its lenders, bondholders and equity sponsor. The Restructuring will eliminate approximately $400 million of debt from the Company’s balance sheet, provide $90 million of new equity capital from the bondholders via a rights offering and include a new $719 million credit facility to be provided by the existing asset based lenders (the “Lenders”). This transaction is supported by all of the Lenders, approximately 78% of the holders of the Company’s 10.25% Senior Secured Second Lien Notes due 2019 (“Notes”), and the primary equity holder.
“This is a positive action for ModSpace. Through this, we will de-lever our balance sheet and provide an infusion of new capital upon which to grow. Our employees, customers, and vendors can be assured that it will be business as usual and we will honor all of our commitments to them,” said President and CEO Charles Paquin.
To implement the Restructuring, the Company and certain of its affiliates have filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the District of Delaware and, one affiliate has initiated a complementary, ancillary proceeding in Canada under the Companies’ Creditors Arrangement Act (“CCAA”), all to pursue a prepackaged plan of reorganization (“Plan”).
The Company has received debtor in possession financing commitments from its existing Lenders that will fund the operations during the Chapter 11 and CCA filings. The Company anticipates that the restructuring will be concluded by the end of February.
Anticipated Treatment of Stakeholders:
The Restructuring contemplates that key stakeholders will receive the following treatment under the Plan:
— All trade creditors will be paid in full and on time.
— Employee wages and benefits will be paid in full in the ordinary course without interruption.
— Customer orders will be fulfilled consistent with past practice without delay or disruption.
— All holders of the Notes will receive, on a pro rata basis, substantially all of the common stock in the reorganized Company in exchange for existing claims for outstanding principal and accrued interest. Existing equity holders will retain a small equity interest in the reorganized Company. The equity interests received by the holders of the Notes and existing equity holders will be significantly diluted by, among other things, the equity interests issued in connection with the Rights Offering.
“We greatly appreciate the support of our Lenders, bondholders and shareholders throughout this process, and look forward to working with them to achieve a revitalized balance sheet that provides the perfect platform for growth and supports our ambition to extend ModSpace’s leadership role in the modular space industry,” said Mr. Paquin.
Mr. Paquin continued, “I want to give special thanks to all of our employees. Over the last 12 months the Company has explored a variety of financial, operational and strategic initiatives, including a merger that was determined not to be in the best interest of the company and its stakeholders. These activities have placed an additional burden on the organization and I believe that our team has done a great job managing through the circumstances. We will now have a strong balance sheet that complements our outstanding operation and industry leading market position.”
Cleary Gottlieb Steen & Hamilton LLP is acting as legal counsel for the Company; Lazard Middle Market LLC and Lazard Freres & Co. LLC are acting as the Company’s investment bankers and Zolfo Cooper is the Company’s financial advisor. Dechert LLP is acting as legal counsel and Moelis & Company LLC is acting as financial advisor to the ad hoc group of noteholders.
For access to Court documents and other general information about the Chapter 11, please visit www.kccllc.net/modspace.
Modular Space Corporation (ModSpace), based in Berwyn, Pa., is the largest U.S.-owned provider of office trailers, portable storage units and modular buildings for temporary or permanent space needs. Building on nearly 50 years of experience, ModSpace serves a diverse set of customers and markets—including commercial, construction, education, government, healthcare, industrial, energy, disaster relief, franchise and special events—through an extensive branch network across the United States and Canada. For more information, visit www.ModSpace.com or http://Blog.ModSpace.com.
FORWARD LOOKING STATEMENTS
This press release and other oral and written statements by representatives of ModSpace regarding matters such as the completion of restructuring transactions, the completion of any related financings and the achievement of the expected benefits of any such transactions, including the combined company’s expected future operational and financial performance, may be forward-looking statements. These statements are identified by words or phrases such as “look forward to” “future,” “anticipate”, “expect,” “will,” “may,” and similar expressions of future intent or the negative of such terms. Although any such forward-looking statements reflect management's current beliefs based upon information currently available to management and upon assumptions which management believes to be reasonable, actual results may differ materially from those stated in or implied by these forward-looking statements. A number of factors could cause actual results, performance or achievements to differ materially from the results expressed or implied in any forward-looking statements, including: the ability to complete the Restructuring and related transactions; the terms of any financings related to the Restructuring; the condition of the global capital markets; global economic conditions, including in the oil and gas industry; changes in demand within key industry end-markets and geographic regions; the competitive environment in which ModSpace operates; changes in federal, state and local laws and regulations, including in state building codes; ability to tend to ModSpace’s modular assets; changes in raw material and labor costs; ability to engage with manufacturers if existing relationships are discontinued; and ability to retain and recruit key personnel. These factors should be considered carefully and readers should not place undue reliance on any forward-looking statements. Except as required by law, ModSpace undertakes no obligation, and specifically declines any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Jennifer E. Mercer
Epiq Strategic Communications for ModSpace