Carlson Travel files pre-packaged bankruptcy, eyes speedy emergence

By Sarah Lizee

Olympia, Wash., Nov. 12 – Carlson Travel, Inc. and its 37 affiliates made a pre-packaged Chapter 11 bankruptcy filing Thursday in the U.S. Bankruptcy Court for the Southern District of Texas, according to court documents.

Michelle McKinney Frymire, chief executive officer, said in a declaration that Carlson Travel’s business faced “an immense challenge” from the effects of Covid-19 on the travel industry.

Over the last several months, the company engaged in a process with its key stakeholders and some third parties to chart a path forward and preserve the value of the business.

The debtors now have the support of holders of 100% of revolving credit facility claims, about 95% of new money notes claims, about 90% of new senior secured notes claims, about 86% of third-lien notes claims, 100% of existing equity interests, and its majority indirect shareholder.

Plan terms

The company has commitments for $350 million in equity capital, including through a $191 million fully backstopped equity rights offering, and $775 million of exit financing in the form of about $625 million of exit first-lien notes and a $150 million exit financing facility, which will provide enough capital to fund distributions under the plan and the debtors’ go-forward operations.

The equity infusion and exit facilities, combined with the repayment or equitization of substantially all outstanding debt obligations, will eliminate about half of the company’s existing roughly $1.6 billion in debt.

The pre-packaged plan provides for payment in full of the revolving credit facility and new money notes, partial equitization of the new senior secured notes in consideration for rights to participate in the new money equity rights offering and the funding of exit first-lien notes, and the receipt of the issuance of $125 million of exit first-lien notes.

It also provides for the release and extinguishment of the third-lien notes in consideration for new warrants, and release and extinguishment of the subordinated notes in consideration for $250,000 in cash if the class votes to accept the plan.

Existing equity will be canceled, and all general unsecured claims will be paid in full.

Holders of other secured claims will receive payment in full in cash, delivery of the collateral securing their claims, or reinstatement of their claims.

Other priority claims will be paid in full.

Intercompany claims and interests will be reinstated, or canceled and released without any distribution.

The company is seeking a speedy emergence from Chapter 11, and had asked the court to approve the disclosure statement and confirm the plan on Friday.

U.S. trustee objection

On Friday, Region 7 U.S. trustee Kevin M. Epstein objected to the company’s pre-packaged plan.

“The debtors seek to waive critical bankruptcy code requirements, approve the disclosure statement, and confirm the plan within 18 hours of filing for bankruptcy,” Epstein said in his objection.

“Due process requires that parties in interest, governmental agencies, and the court have a reasonable period of time to evaluate and to react to 38 Chapter 11 cases.”

Epstein said the “breakneck schedule” of this case effectively shifts the burden to the creditor body without the protection contemplated by the bankruptcy code.

“Due process and the bankruptcy code require that parties be given more than a few hours to determine if the fundamental requirements of a meeting of creditors, the formation of a committee, and the filing of scheduled and statements of financial affairs should be jettisoned in these cases,” the U.S. trustee added.

Other details

While the company isn’t seeking access to debtor-in-possession financing, it did ask for court approval to use the cash collateral of its pre-petition secured lenders. On Friday, the company received interim approval of the cash collateral use.

The company listed $1 billion to $10 billion in both estimated assets and estimated liabilities.

Its largest unsecured creditors are U.S. Bank Trustees Ltd., based in London, with a $436.1 million 2025 senior secured notes claim, a $388.37 million 2025 euro senior secured notes claim, a $277.78 million 2026 senior notes claim, a $5.78 million 2027 senior subordinated euro notes claim, and a $4.05 million 2027 senior subordinated dollar notes claim, BNP, based in Brussels, with a $5.03 million trade supplier claim, and CDS, based in Saint Cloud, France, with a $2.73 million trade supplier claim.

Based in Minneapolis, Carlson Travel is a business travel management company that offers traveler care, travel management, consulting, booking services, meetings and events. The Chapter 11 case number is 21-90017.

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