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Law360 (July 21, 2020, 4:05 PM EDT) -- Educational travel organizer WorldStrides filed for Chapter 11 in a New York bankruptcy court Tuesday with a prepackaged plan to cut $248 million in debt and raise the liquidity it says it needs to weather the COVID-19 pandemic's impact on global travel.
In an announcement Tuesday, Virginia-based Lakeland Tours LLC, which does business as WorldStrides, said it was on track for a record year when the pandemic shut down its business, sending it into talks with its secured lenders to hammer out an agreed deal to trim its $768 million in debt and raise $200 million in new cash.
"Nevertheless, both our owners and our lenders continue to believe in the long-term opportunity for WorldStrides, and they are now reinvesting in our future," CEO Robert Gogel said in the announcement.
Lakeland was founded in 1967 to provide middle school travel programs in the Washington, D.C., area, according to its announcement. It offers worldwide educational travel to about 550,000 students annually from about 7,000 schools and 800 universities, the company said. The announcement said Lakeland has about 1,500 employees worldwide, and about 500 are currently furloughed.
As of the filing date, the company had about $768 million in funded debt, with $642 million in senior secured debt and $126 million in unsecured notes, Lakeland CFO Kellie Goldstein said in her Chapter 11 declaration.
Goldstein said the company had about $650 million in net revenue in 2019 and had projected more than $840 million in net revenue for 2020, but COVID-19 travel restrictions have "decimated" its business, stopping current income, slowing future bookings and requiring it to find the capital to provide what it estimates will total $366 million in refunds for canceled trips.
While Lakeland's long-term prospects remain good, it estimated that it needs at least $200 million in additional liquidity to weather the crisis, Goldstein said. As a result, the company began talks with its creditors and other parties, eventually reaching a deal for a restructuring support agreement with the holders of about 85% of its secured debt, it said.
Under the terms of the plan, the consenting lenders and Lakeland owners Eurazeo and Primavera Capital Group would provide up to $368 million for its debtor-in-possession facility, which will be rolled up into $260 million in exit financing and the equity of the reorganized business. The $126 million in unsecured notes will be canceled, and the remaining secured debt will be exchanged for $200 million in new secured debt and $160 million in unsecured debt.
In its announcement, the company said it will continue to pay employees and vendors and provide refunds for canceled trips, and that it hopes to emerge from Chapter 11 in October.
The company said it has retained Houlihan Lokey as its financial adviser and KPMG as its restructuring adviser.
Lakeland is represented by Nicole L. Greenblatt, Susan D. Golden and Whitney C. Fogelberg of Kirkland & Ellis LLP.
The case is In re: Lakeland Tours LLC et al., case number 20-11647, in the U.S. District Court for the Southern District of New York.
--Editing by Haylee Pearl.
For a reprint of this article, please contact reprints@law360.com.
