Reorganization and Recapitalization Will Leave Acosta with the Strongest Balance Sheet in the Industry
Acosta, Inc., a full-service sales and marketing agency, announced that it has reached an agreement with more than 70% of its lenders and more than 80% of its noteholders, each by principal amount, on the terms of a comprehensive reorganization and recapitalization. The deal will eliminate all of the Company’s approximately $3 billion of long-term debt. Further, investors have committed $250 million in new equity capital backstopped by institutions committed to the long-term success of Acosta.
“This is a very positive development for Acosta and our employees, clients, customers and other business partners,” said Darian Pickett, CEO of Acosta. “Through this strategic step, Acosta will be well-positioned, both operationally and financially, to make critical investments in our business and drive sales and market penetration for our clients and customers. Our business remains fundamentally strong, and we are pleased that our new investors recognize the long-term value Acosta can create for our clients and customers. We all are excited about what the future holds for Acosta.”
CONTINUITY OF SERVICE
Acosta’s “pre-packaged” Chapter 11 Plan of Reorganization (the “Plan”), described in greater detail below, provides that vendors will be paid in full for goods and services provided before and during the Chapter 11 process, and all employees can expect to receive their usual wages and benefits.
“This process will enable us to continue to operate our business without disruption to clients, customers, employees, and business partners,” said Mr. Pickett. “Our number one priority always has been to help drive long-term growth for our clients and customers and ensure they are well-equipped to succeed in the competitive consumer landscape. We look forward to doubling down on this commitment by reinvesting in our people and our capabilities across all retail channels.”
Mr. Pickett added, “I would like to thank all of our valued employees, clients, customers, and business partners for their ongoing support.”
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TERMS OF THE RESTRUCTURING AGREEMENT
The agreement provides for a conversion of all of Acosta’s bank and bond debt into equity, an infusion of $250 million in cash, and full satisfaction of other unsecured obligations in the ordinary course of business. After the restructuring and recapitalization, on a pro forma basis, Acosta will have zero net interest burden and remain significantly cash flow positive with ample liquidity and working capital. The Company will emerge with the strongest balance sheet in the industry.
Acosta and its lenders have agreed to implement the restructuring through the “pre-packaged” Plan. Accordingly, Acosta and its U.S. affiliates intend to file voluntary Chapter 11 petitions in the coming weeks. Acosta’s non-U.S. subsidiaries and affiliates are not expected to be included in the upcoming filing or affected by the Chapter 11 process. Having already received support for the Plan from a supermajority of both its lenders and noteholders, the Company expects to complete the restructuring process quickly.
Kirkland & Ellis LLP is acting as legal counsel for the Company, PJT Partners, Inc. as financial advisor, and Alvarez & Marsal as restructuring advisor. Davis Polk & Wardwell LLP is acting as legal counsel for an ad hoc group of lenders and Centerview Partners is acting as financial advisor. White & Case LLP is acting as legal counsel for certain supporting creditors. Sullivan & Cromwell LLP is acting as legal counsel for certain other supporting creditors.
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