⛽️New Chapter 11 Bankruptcy Filing – OFS International, LLC⛽️
Filing attacks an allegedly fraudulent transfer totaling $10mm
Texas-based OFS International LLC and two affiliates (together, the “debtors”) filed chapter 11 bankruptcy cases in the Southern District of Texas. The debtors are a private company that provides a range of services related to oil country tubular goods, including inspection, couplings manufacturing, threading, storage, accessories, field services, and rig returns. Props to the debtors for surviving the absolute beating that the O&G sector took the past 6–7 years, but apparently the global pandemic was the nail in the coffin for them. The debtors put in a bit more mildly, providing surprisingly little insight into their operations and financials:
Like all companies providing oilfield services, the Debtors’ business was severely impacted by the negative market conditions in the energy section [sic] and reduced commodity prices during 2020. However, the Debtors’ performance has started to improve.
The debtors’ primary petition lists $10–50mm in estimated assets and $50–100mm in estimated liabilities. The debtors peg pre-petition trade debt at ~$50mm. The capital structure includes:
· A $12.5m ABL facility;
· A $14.4m secured line of credit; and
· $8m between two unsecured PPP loans.
JPMorgan Chase Bank, N.A. was the debtors’ ABL facility lender until May 28, 2021 when it transferred all of its rights under the credit agreement to Sandton Capital Solutions Master Fund, V, LP.
The debtors have locked in $16.5mm in post-petition financing from Sandton Capital, including a $12.5mm DIP ABL facility and a $4mm DIP term loan facility. The DIP facilities include a rollup of Sandton Capital’s $12.5mm pre-petition ABL facility, which before filing, was secured by all of the debtor’s property except their real property.
On the day of filing, the debtors filed an adversary proceeding seeking to avoid and recover an allegedly fraudulent $10mm transfer made by debtor OFSI Holding to TMK Steel Holding Limited (“TMK”). The transfer was made in exchange for 49% of OFSI Holding’s outstanding shares that TMK Steel was holding. Apparently, the debtors had no cash to fund the purchase, so it increased its ABL facility by $10mm then promptly kicked that over to TMK Steel. This whole situation is sketchy to say the least. PAO TMK, a Russian corporation and affiliate of TMK Steel, is a current secured lender to the debtors. It’s unclear whether TMK Steel is affiliated with the debtors’ president and CEO Konstantin Semerikov, but it looks like they’ve both been involved with the debtors from the outset. All of this is very strange considering Russia has never been accused of any improprieties in any respect.
The first day hearing was held on June 2, 2021. The court granted all of the customary first day motions, including permitting the debtors to tap $800k of the DIP term loan facility.
Date: May 31, 2021
Jurisdiction: S.D. of Texas (Judge Jones)
Legal: Porter Hedges LLP (Joshua W. Wolfshohl, Aaron J. Power, Megan Young-John)
Investment Banker/Financial Advisor: Chiron Financial LLC
Claims Agent: BMC Group (Click here for free docket access)
Other Parties in Interest:
Pre-Petition ABL Facility & DIP Lender: Sandton Capital Solutions Master Fund, V, LP
Legal: McGuireWoods LLP (Mark Freedlander, Frank Guadagnino)
Secured Line of Credit Lender: PAO TMK
Legal: Hawash Cicack & Gaston LLP (Walter Cicack)
Former Pre-Petition ABL Facility Lender: JPMorgan Chase Bank, N.A.
Legal: Norton Rose Fulbright US LLP (Greg Wilkes, Laura Smith)