A lifeline was thrown to financially struggling Cypress Environmental Partners, L.P., the firm that publicly expressed concerns it might have to financially reorganize if it didn’t get help from its lenders over its more than $58.1 million debt.
The Tulsa-based company announced its senior secured debt with seven existing lenders was acquired 100% by Argonaut Private Equity in Tulsa. The firm, through Piper Sandler & Co. solicited potential debt and equity investors to recapitalize ahead of a May 31 maturity date of its credit facility.
Cypress and its lenders worked together to ensure business continuity and normal operations for Cypress’s customers and employees. The announcement indicated Piper Sandler reported the results of an extensive marketing process to the board of directors of Cypress’s general partner and made a recommendation which proposal was superior. The board and lenders independently agreed with the recommendation, allowing Cypress to now pursue a court-supervised restructuring with the support of Argonaut, the new senior-secured lender.
According to Cypress, the New York Stock Exchange continues to monitor trading in the company’s common units for compliance with the Exchange’s requirement of a $15 million market capitalization over 30 trading days. If Cypress failed to meet those standards, its trading would be halted.
Peter C. Boylan III, Chairman, President, and CEO called Argonaut a highly respected Tulsa private equity firm that he has known since inception.
“In 2020 Cypress had discussions with Argonaut about potentially investing in Cypress. Steve Mitchell, Argonaut’s CEO and Managing Director, is a highly regarded successful investor and has been a friend for over a decade,” added Boylan.
He said Argonaut had been interested for several years in the inspection industry. Boylan expressed regret that equity holders will lose their investment, including insiders such as management, board and individuals that control the general partner, who own 76% of the equity.
“The pandemic drove a steep decline in our business that left us with too much debt. Additionally, the Fair Labor Standards Act litigation that swept through the inspection industry over the last several years has been expensive and time consuming for our customers, our competitors, and Cypress.”
Boylan said Argonaut has requested that some of Cypress’s current insiders co-invest with them as minority owners.
Steve Mitchell, CEO and Managing Director at Argonaut called it “unfortunate” but the FLSA litigation affecting the entire inspection industry was not unique to Cypress.
“As the new senior secured lender, we look forward to expeditiously working with Cypress’s management, board of directors, and advisors on a court-supervised restructuring. We plan to have Cypress emerge with a strong balance sheet that will position them for growth.”