Rand Logistics files Chapter 11 case; second-lien lenders to get stock

By Caroline Salls

Pittsburgh, Jan. 30 – Rand Logistics, Inc. made a pre-packaged Chapter 11 bankruptcy filing Monday in the U.S. Bankruptcy Court for the District of Delaware.

Rand announced on Nov. 21 that American Industrial Partners (AIP) has agreed to acquire the company in a transaction that will be completed through a pre-packaged plan of reorganization.

As previously reported, the company entered into an agreement under which AIP affiliate Lightship Capital LLC will convert all of Rand’s second-lien debt into 100% of the new common equity of the reorganized company, subject to dilution by shares to be issued under a management incentive plan.

As a result of the AIP transaction, Rand said it will enjoy its strongest financial position in recent years.

Rand’s business will continue uninterrupted pending completion of the transaction, the terms of which provide for payment in the ordinary course of all company vendors and other unsecured creditors, according to the release.

Under the pre-packaged plan, all of the second-lien lender’s claims will be cancelled in exchange for 100% of the new common stock to be issued by the reorganized company, subject to dilution by the equity incentive plan.

All unsecured claims will be paid in cash in full or reinstated.

Existing common and preferred stock will be cancelled.

Holders of first-lien claims will be paid in full in cash, as will administrative claims, fee claims, priority tax claims, debtor-in-possession financing claims, other priority claims and other secured claims.

In conjunction with the bankruptcy filing, Rand obtained a commitment for $25 million in debtor-in-possession financing from Lightship.

Before a March 16 outside plan effective date milestone, interest on the facility will be 6%, payable in kind. After that date, interest will accrue at a rate of 12%, payable in cash.

The DIP facility will mature 90 days after the bankruptcy filing date.

A total of $10 million of the financing will be immediately available, according to the motion filed with the court.

According to court documents, Rand had $268.95 million in consolidated assets and $258.54 million in consolidated debt as of Nov. 30.

The company did not list any unsecured creditors with claims of $1 million or more.

Rand said in an 8-K filed with the Securities and Exchange Commission that the Chapter 11 filing constituted an event of default on its term loan credit agreement dated March 11, 2014 and its credit agreement dated March 27, 2015. However, any efforts to enforce payment obligations are automatically stayed under the Bankruptcy code.

Pepper Hamilton LLP is acting as Rand’s legal counsel for the Chapter 11 proceedings.

Based in New York, Rand provides bulk freight shipping services in the United States and Canada. The Chapter 11 case number is 18-10175.

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