Capstone Partners’ Financial Advisory Services (FAS) group provided insolvency services to Red River Waste Solutions, LP (RRWS or the Company) during its reorganization under Chapter 11 of the United States Bankruptcy Code.
RRWS, a solid waste hauler serving clients in Tennessee, Kentucky, Indiana, Alabama, and Texas, had recently refinanced with a regional bank based in California but had defaulted on the loan. The owners were pursuing a sale when they hired Capstone’s FAS team to stabilize the company to complete the sale or step in if the sale was unsuccessful.
The root causes of the Company’s distress included sub-optimal contracts which did not earn as much as they could have, disorganization in the Company’s management organization, over-leveraged financing on the part of the new senior lender and the negative effects of external challenges – namely changes in consumer demand due to the pandemic and contracts for extreme weather-related clean up that caused the business to have to operate at a loss for an extended period of time.
After experiencing resistance from the initial lender with the proposed sale, the Company, with the assistance of Capstone FAS, filed for Chapter 11.
During this process, FAS arranged a small Debtor-in-Possession (DIP) loan funded by the Company’s owners, followed by an additional DIP loan funded by a third party to allow the Company to continue operating while attempting to chart a mutually aggregable course of action with the senior lender. Meanwhile, FAS was also able to negotiate with the municipalities served by RRWS to continue service and maintain revenue which included a $1.9 million payment from one city to facilitate an orderly exit from its contract.
Capstone was ultimately able to bring in a bidder for substantially all the assets of the company and negotiate a multi-million dollar contribution from equity as part of a settlement between the Company, senior lender, and unsecured creditors’ committee. The plan was approved by the court and allowed the team to maximize the value for the benefit of the Company’s creditors, preserved approximately 200 jobs in the various markets in the Company’s footprint, and prevented unexpected disruption of municipal waste service for clients in five states.