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 Chanin Capital Partners acted as financial advisor to the Official Committee of Unsecured Creditors of Encompass Services Corporation, a $4 billion roll-up of facilities systems and solutions providers concentrating primarily on the installation and maintenance of HVAC and plumbing systems, which restructured pursuant to the sale of the majority of the Company's subsidiaries.
As a result of an aggressive roll-up strategy and $715 million equity repurchase program, Encompass became over leveraged to the point where it could no longer obtain the requisite bonding to secure new work. The Company was then unable to service its debt and was forced to pursue a restructuring.
Chanin was retained by the Ad-Hoc bondholders in October 2002 to review a proposed exchange offer. The exchange offer was rejected by senior lenders, leading Encompass to file for bankruptcy protection and complete an orderly liquidation of its subsidiaries within six months.
Highlights of the transaction include:
- Encompass is liquidated in an orderly and timely fashion, generating approximately $250 million in proceeds and $120 million in related tax refunds.
- Pre-petition lenders ($600M) receive 30% recovery through distribution of encumbered assets and additional 10%-15% recovery through pro-rata distribution of unencumbered assets.
- Subordinated bondholders ($350M) receive $2.5 million cash settlement.
- Pre-petition trade vendors receive 97% recovery (on $195M balance).
- Bondholders receive 75 bps cash settlement, a 200% premium to the market ask, despite subordination agreement and severely impaired senior secured lenders.
- Majority of 30,000 jobs saved by selling subsidiaries in an orderly and timely fashion.
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