Berkshire, Ares, Weil Gotshal, and Brightspeed

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Passing along a few key restructuring and credit news from the last few days.

Weil Gotshal is winding down after 95 years, Berkshire cleared a $535mm talc settlement against claimant estimates of up to $5.3bn, and Ares is buying Apollo-managed MidCap for $2.6bn at a 30.1% premium. Brightspeed is weighing Chapter 11 as soon as December with about $10bn of debt, while PAG is paying about $514mm for 51% of an Evergrande unit.

The English High Court has sanctioned a restructuring scheme for German toy manufacturer Schleich, reducing debt from approximately €241mm to €166.6mm. The October 23 ruling follows creditor approval of a transaction designed to stabilize the company's capital structure and avoid a potentially more costly insolvency.

The scheme encountered complications involving MeSoFa, a creditor affected by US sanctions but not equivalent UK restrictions. To preserve its economic entitlement without violating US sanctions requirements, the restructuring incorporates a trust arrangement holding the creditor's distributions pending the necessary authorization.

The court also considered material amendments made after the creditors' meeting. Although the scheme was approved, the judge warned that companies should generally return to court for directions when significant changes are introduced after the convening stage, providing important guidance for future cross-border restructurings.

A New Jersey bankruptcy judge has approved a $535mm settlement involving Berkshire Hathaway affiliates and bankrupt talc supplier Whittaker Clark & Daniels. The agreement addresses asbestos-related liabilities and litigation claims against Berkshire, Brenntag and Deutsche Bahn, following the supplier's 2023 bankruptcy filing.

Asbestos claimants challenged the settlement, arguing that it undervalued potential recoveries and that the independent directors negotiating the agreement were compromised by their relationships with the company's legal advisers. Claimants estimated potential liabilities as high as $5.3bn, substantially exceeding the negotiated settlement.

Judge Michael Kaplan rejected the objections, finding the settlement reasonable and insufficient evidence that the directors' independence had been compromised. The decision is significant for mass-tort bankruptcies, where independent directors and negotiated settlements remain central to resolving disputed liabilities.

Ares Capital has agreed to acquire Apollo-managed MidCap Financial Investment Corporation in a $2.6bn cash-and-stock transaction, marking another major consolidation in the private credit market. The acquisition will expand Ares Capital's direct-lending portfolio to more than 800 companies.

MidCap shareholders will receive approximately $10.88 per share, comprising $1.21 in cash and $9.67 in Ares Capital stock, subject to adjustments. The consideration represents a 30.1% premium to MidCap's previous closing share price, with the transaction expected to close in the first half of 2027.

The deal comes as publicly traded business development companies face mounting pressure from discounts to net asset value and concerns over private credit loan quality. Ares Capital trades closer to its reported NAV than many competitors, allowing it to use relatively highly valued shares to acquire a competing portfolio trading at a substantial discount.

Weil Gotshal & Manges, one of Wall Street's most prominent restructuring law firms, has announced plans to wind down after 95 years. The firm's management committee recommended an orderly dissolution on October 28 following a wave of partner departures, failed merger negotiations, and growing uncertainty over its future.

The decision follows unsuccessful merger discussions with Willkie Farr & Gallagher and the departure of several major revenue-generating partners, including corporate practice leader Michael Aiello, who joined Cravath. Weil has reportedly retained AlixPartners to assist with the wind-down, after previously engaging Davis Polk to evaluate restructuring alternatives.

Founded in 1931, Weil advised on landmark bankruptcies including Lehman Brothers, General Motors and Enron. Despite generating approximately $2.1bn in revenue last year and employing around 1,200 lawyers, the firm was unable to prevent accelerating departures. Its planned dissolution illustrates how professional-services firms can lose enterprise value rapidly as partners and their client relationships leave, even without a conventional balance-sheet insolvency.

In a recent statement from the Mozambique Finance Ministry, they said Mozambique is aiming to prioritize negotiations to improve their debt repayment profile and reduce pressure on their treasury to be able to avoid a comprehensive debt restructuring.

The government has estimated they need about $528mm of additional outside financing, which will be complemented by an International Monetary Fund-supported program for 2027–2029.

In September, Moody's cut the country's creditworthiness rating down to Caa3 due to fear the government will restructure their sole Eurobond. Mozambique has faced high financial pressures, especially over the past two years, after post-election violence led to more struggles in their already struggling economy.

Now they are initiating talks with bilateral creditors to convert debt to investments to reduce poverty. Their reform program, supported by the IMF, is set to be complete by the end of 2026.

Apollo-backed broadband provider Brightspeed is preparing for a potential Chapter 11 filing as soon as December as it struggles to secure financing for its fiber network expansion. The company has approximately $10bn of debt and remains in negotiations with creditors over a possible restructuring that could allow it to avoid bankruptcy.

Brightspeed had been pursuing asset-backed financing supported by subscription revenues from its growing fiber network, but efforts to attract new investors have reportedly fallen short. The company is now discussing rescue financing with creditors including Baupost, PGIM, Bracebridge, Citadel and Diameter. Meanwhile, its first-lien loans due 2031 have fallen from approximately 87 cents on the dollar in September to 65 cents.

The company faces the challenge of funding an expensive network build-out while managing a highly leveraged capital structure. Competition, pressure on customer pricing and uncertainty around the long-term economics of fiber have complicated those efforts. A separate group of second-lien creditors, including Arini, is also involved in the restructuring discussions, setting up potentially difficult negotiations over new financing and recoveries.

Private equity firm PAG has agreed to acquire a 51.016% stake in Evergrande Property Services for approximately $514mm, marking the largest asset sale to date by the liquidators of China Evergrande. The transaction follows a competitive auction and represents an important step in recovering funds for creditors of the collapsed Chinese property developer.

PAG will acquire the stake for HK$4.03bn and, upon completion, will be required to make a cash offer for the remaining shares at HK$0.8359 per share. That offer price represents a roughly 29% discount to the company's last closing price before the announcement. The acquisition remains subject to Chinese antitrust approval and other closing conditions.

Evergrande's liquidators are attempting to recover assets against approximately $46bn in creditor claims. Despite the collapse of its parent, Evergrande Property Services remains profitable, operating a large property-management business with recurring revenue. PAG plans to retain the company's Hong Kong listing and operate it independently following the acquisition.

Moelis has won a $3.4mm restructuring fee dispute against UAE state-owned Emirates Petroleum Company (Emarat), after the English High Court ruled that the bank was entitled to fees from refinancing transactions completed after its advisory work had been paused.

Moelis was retained to advise Emarat on its existing debt, under an engagement agreement providing for monthly retainers of $110,000 and a restructuring fee equal to 0.25% of the debt restructured, subject to a $3mm minimum. Emarat later paused the engagement and completed refinancing transactions without Moelis actively working on them.

Emarat argued that Moelis had not done enough to earn the commission, but the court found that the engagement agreement did not require the bank to be the effective cause of the refinancing. The judge also rejected Moelis's claim for higher fees associated with raising new debt, finding that the transactions involved restructuring existing obligations. The ruling provides important guidance on how restructuring advisory fees are calculated and when they remain payable after an engagement is suspended.

Raizen’s dollar bonds have risen after the Brazilian biofuels company was able to reach a tax settlement, which covered 22.4bn reais in liabilities. Their notes, which were set to be due in 2034, just gained 4 cents, allowing them to trade at 71.28.

Raizen SA is also putting part of its fuel distribution business up for sale, giving shareholder Shell Plc a meaningful stake in the business unit. The company still needs to announce its plans to look for a partner for its fuel distribution unit following a vote at a meeting. This will result in Shell holding less than a 20% stake in the company, with them gaining some rights due to the use of their brand. This deal comes following Raizen’s larger restructuring.

The restructuring also includes a poison pill clause, which states that if any shareholder reaches a stake higher than 25% in the company, the new investor will have to make a tender offer to obtain the remaining shares.

As always, I am here to help. Do not hesitate to reply to this email with any questions on recruiting, restructuring, or anything else.

Best,
Rx

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