As expected, Houston-based Integrated Electrical Services filed a chapter 11 case in Dallas yesterday and immediately submitted a debt-for-equity reorganization plan that is the culmination of months of pre-bankruptcy negotiations with the institutional debt holders of the highly-leveraged electrical contractor.
This is initial docket of the case, and the Houston Chronicle article on the filing is here. Dan Stewart of Vinson & Elkins’ Dallas office is taking the lead as debtor-in-possession counsel, and Sanford R. Edlein of Glass & Associates, Inc. is the company’s chief restructuring officer. The Creditors Committee has already been appointed and is comprised of institutional debt holders Tontine Capital Partners, L.P., Southpoint Capital Advisors, L.P., and Fidelity Management & Research Co., which were represented in pre-bankruptcy negotations by Marcia Goldstein of Weil, Gotshal & Manges’ New York office. The IES case has been assigned to the Bankruptcy Judge who has the best nickname of any judge in the United States Judiciary, Judge Harlin “Cooter” Hale.
IES is a roll-up that was incorporated in 1997 and, since that time, has used debt to finance an expansion of its operations through the acquisition of other electrical contracting companies. As of the most recent fiscal year, the company had revenues of a little over a billion and employed around 8,900 employees in 140 locations around the world. IES had a net loss of about $129.5 million for last year ($3.31 per share), which followed a net loss of almost $125 million for the previous fiscal year. The bankruptcy filing has been widely-anticipated since mid-December when the company announced that it was contemplating a chapter 11 case with a prepackaged reorganization plan. The NYSE suspended trading of IES stock at that time.
The IES plan is essentially to clean up its balance sheet by swapping around $175 million of its approximate $225 million in senior subordinated debt for an 82% equity stake in the reorganized company. Holders of existing stock in the company will be diluted to 15% of the reorganized company and management and employees will receive 3%. Meanwhile, Bank of America is stepping up to provide about $80 million in debtor-in-possession financing during the chapter 11 case, which IES hopes to conclude on a fast track by mid-to-late April of this year.