Select Staffing Bankruptcy Plan Approved After Five WeeksMichael Bathon
The temporary staffing firm known as Select Family of Staffing Cos. won approval of a bankruptcy reorganization plan that cuts debt by about 46 percent, or $300 million, five weeks after seeking court protection.
U.S. Bankruptcy Judge Kevin J. Carey today in Wilmington, Delaware, granted the company, formally known as Koosharem LLC, approval of the pre-packaged plan.
“This is why you pay your lawyers so much,” Carey said at the end of the hearing to laughter from attorneys in the courtroom.
The Santa Barbara, California-based company filed for bankruptcy on April 1. It had already worked out terms of the reorganization and obtained support from lenders for a plan to cut debt of more than $650 million to about $350 million by raising funds in an equity rights offering and issuing new debt.
Lenders holding 98 percent of about $492 million in first-lien secured term and revolving loan facilities voted in favor of the plan. Second-lien lenders owed about $159 million voted unanimously to accept it, Jeffrey N. Pomerantz, a lawyer for Select Staffing, said at the hearing.
Under the reorganization plan, the company will raise about $225 million in equity capital investments and $350 million in new debt to fund payments. To help fund operations, the company will seek to borrow about $120 million in revolving loans after exiting court protection.
The first-lien lenders will get about $365 million in cash and the opportunity to participate in a $175 million equity rights offering, according to court papers. Lenders that are backstopping the rights offering have agreed to make a $50 million equity investment in the company.
The reorganized company will have a total enterprise value from $680 million to $780 million, according to a valuation analysis done by Goldman Sachs Group Inc. The equity in the new company will have an estimated value from $330 million to $430 million.
Second-lien lenders will get $12 million in cash and warrants to buy equity in the reorganized company, according to court documents.
Unsecured creditors, owed about $32.6 million, and a $22.5 million obligation owed to the California State Compensation Insurance Fund will be paid in full, according to court papers.
Select Staffing sought bankruptcy protection after the labor market slumped in the U.S. recession. That resulted in liquidity constraints that caused the company to default on secured debt, according to court documents.
The company provides temporary staffing services through 312 offices in 48 states. It owns 167 offices and the rest are franchised, according to court papers. The company generated about $2 billion in gross revenue in 2013.
Koosharem acquired Ablest Inc. in 2007 for $11 per share in a deal valued at $32.5 million.
The lead case is In re Ablest Inc., 14-bk-10717, U.S. Bankruptcy Court, District of Delaware (Wilmington).