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Carlson Travel (CWT) speeds restructuring through bankruptcy

21:34, 12 November 2021

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Lightning-fast action by a US bankruptcy court has headed off an impending liquidity crisis for travel management company CWT.

The company, formerly known as Carlson Wagonlit Travel, got a federal judge to verbally sign off on its recapitalisation plan one day after its indirect subsidiary Carlson Travel and 37 affiliated debtors filed for Chapter 11 bankruptcy.

CWT pushed for quick confirmation of its plan, citing looming liquidity issues.

Chief Executive Michelle McKinney Frymire stated in a court filing: “Over the course of the last few weeks and in response to the debtors’ announcement of the proposed Chapter 11 cases, the debtors fielded an increased volume of demands for increased financial security/cash collateral and tightened trade terms.”

McKinney Frymire added CWT faces significant cash flows at the end of each month, tied to, among other things, payroll.

Exiting bankruptcy

At a court hearing Friday morning, attorney Alexandra Schwarzman of Kirkland & Ellis, who represents CWT, was more specific, telling the court CWT needed to exit bankruptcy next Friday. The company has lined up $775m in exit financing and $350m in equity capital.

CWT had asked for and was granted an emergency hearing at 7:45am Houston time (UTC+6).

That afternoon, Judge Marvin Isgur issued an oral order, tentatively confirming the plan. He said any delay increases the probability of very significant injury to the business. “And the speed is both authorised and necessitated by the circumstances of the case,” he added.

Pre-packaged plan

CWT filed a so-called pre-packaged plan Thursday with the US Bankruptcy Court in Houston. A pre-packaged plan is a restructuring that has been negotiated in advance with creditors and has been filed with their blessing.

CWT’s plan provides for $350m in new equity while also eliminating approximately half the company’s debt. It will pay in full all business partners and other providers of goods and services.

The plan has the backing of 100% of CWT’s bank group and holders of over 90% of the company’s outstanding secured debt.

Effects of pandemic

CWT was heavily impacted by the coronavirus pandemic. The company ended 2019 with its highest traffic, transactions, revenue, and EBITDA in history. As the global pandemic spread, revenue dropped 57% between February and March 2020 and 66% year over year.

Management implemented cash preservation measures, saving $500m, and refinanced debt. Schwarzman told the court the measures were predicated on a 2020 recovery in the travel industry.

A spike in global Covid-19 cases in early 2021 caused travel volumes to fall to levels similar to those at the beginning of the pandemic, leading to forbearance agreements when CWT was unable to make monthly debt payments and ultimately, the recapitalisation plan.

Belgian innovator Georges Nagelmackers started the company that would become CWT in 1872 by adding sleeping compartments to trains serving the European continent. Wagons-Lits literally means "sleeping cars." He later founded the Orient Express.

Read more: Carlson Travel seeks speedy approval of bankruptcy plan

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