Leslie's Files a Prearranged Chapter 11 That Cancels Its Stock and Hands the Company to Term Lenders, Capping a Fortnight of Distress Notices Across the Small-Cap Tape

by Daniel Brenner · September 30, 2026

Senior Markets Analyst, The SmallCap Signal

Leslie's, Inc. and nine subsidiaries filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of Texas on Sept. 30 to implement a pre-arranged plan of reorganization, the company said in an 8-K filed the same day. The plan is backed by a restructuring support agreement with holders of approximately 81.1% of its prepetition term loan, and it is blunt on the equity: all existing equity interests will be cancelled and no consideration will be paid to holders, according to the filing.

The debt is a two-layer bank structure. The 8-K says the filing is an event of default under approximately $756.65 million of borrowings under a March 9, 2021 term loan agreement, with Alter Domus (US) LLC as agent, and approximately $50 million under a 2012 asset-based facility agented by Bank of America, N.A. The press release, filed as an exhibit, describes the outcome as a reduction of approximately $685 million, or 90%, of outstanding funded debt.

New money comes in three pieces. Term lenders are to provide a $90.0 million priming super-priority DIP term loan, half on the interim order and half on the final order, according to the 8-K. Existing ABL lenders are to provide a $225.0 million DIP revolver that includes a creeping roll-up of the prepetition ABL. And lenders that sign the RSA may participate ratably in a $60.0 million private placement of new common equity representing 55.80% of the reorganized company, subject to dilution by a management incentive plan.

The pricing is where the structure shows its teeth. The ABL DIP and term DIP are expected to bear SOFR plus 6.50% and SOFR plus 3.25% respectively, each maturing six months from the petition date, the 8-K says. Term DIP lenders earn a 9.50% commitment premium on what they fund, paid in additional DIP obligations. The backstop parties, who have committed to fund the full $90.0 million and buy any unsubscribed equity, receive a further 7.00% premium on the DIP commitment and a 7.50% premium on the equity raise, delivered as 4.20% of the new equity.

On the effective date, $75 million of term DIP obligations convert into an exit term loan and the remainder, including premiums and accrued interest, converts into 30% of the new equity, according to the filing. Prepetition term loan holders receive 10% of the new equity pro rata. General unsecured creditors share a cash pool whose size the 8-K does not state.

The RSA sets a fast clock: an interim DIP order within three days of the petition date and a final order within 35, a plan and disclosure statement within 20 days, confirmation within 100 days and an effective date within 110 days. Lenders have ten business days to elect into the DIP and the equity raise, and must take both or neither. The release targets emergence in early 2027.

The footprint is shrinking too. The board approved a strategic plan on Sept. 27 and on Sept. 29 the company closed approximately 76 U.S. stores it identified as under- or non-performing, the 8-K says; it cannot yet estimate the charges. The 10-Q for the quarter ended July 4, 2026 had counted 943 company-operated locations in 38 states.

The listing was already going. The 8-K discloses a Sept. 25 Nasdaq notice that the stock is subject to delisting because its bid price closed below $1.00 for 30 consecutive business days and, because the company effected a reverse split within the prior year, it gets no compliance period. Nasdaq will suspend trading at the open on Oct. 6 unless a hearing is requested by Oct. 2; the company does not intend to appeal and expects the shares to move to an OTC Markets Group venue. The split was 1-for-20, effective for trading on Sept. 29, 2025, per the 10-Q.

That 10-Q, filed Aug. 12, had put the outcome in writing. It stated that conditions raise substantial doubt about the company's ability to continue as a going concern, that the term loan matures on March 9, 2028, and that the company expected to need to refinance, restructure, extend or, if necessary, seek relief under applicable reorganization laws before then. The same filing showed quarterly sales of $458.5 million versus $500.3 million a year earlier, a nine-month net loss of $87.7 million, cash of $45.9 million, the term loan at $756.65 million with a 6.51% effective rate, $30 million drawn on the revolver and a stockholders' deficit of $492.7 million.

Leslie's was the only new Chapter 11 petition from an exchange-listed small cap that our search of 8-Ks in the SEC's full-text index for Sept. 16 to Sept. 30 turned up, but two earlier cases moved. Sangamo Therapeutics, which filed in Delaware on June 23 (Case No. 26-10989), completed the sale of its ST-920 Fabry disease gene therapy assets to PTC Therapeutics on Sept. 17 for $111,000,000 in cash plus up to $100,000,000 of contingent milestone consideration, according to an 8-K filed Sept. 21. Its stock trades on the OTCID Basic Market as SGMOQ. That is the biotech version of Chapter 11: a court-run auction of the Fabry program, not a debt restructuring.

Synergy CHC Corp. filed Chapter 11 in the District of Columbia on Sept. 4 and on Sept. 11 received a Nasdaq determination to delist under Listing Rules 5101, 5110(b) and IM-5101-1, according to an 8-K filed Sept. 16; suspension was set for Sept. 18 with no appeal planned. The debt behind it was small: an Aug. 26 8-K reported that ACP Agency, LLC, agent under a May 30, 2025 term loan, had accelerated approximately $18.9 million as of Aug. 21, exclusive of continuing interest and fees.

Below the bankruptcy line, Item 3.01 filings kept coming. TELA Bio said in a Sept. 18 8-K that Nasdaq notified it on Sept. 15 that its stock is subject to delisting after the 180-day bid-price grace period expired on Sept. 14; it intends to request a hearing, which stays suspension, and has called an Oct. 8 special meeting on a reverse split of between 1-for-5 and 1-for-15. Dyadic International disclosed two Nasdaq notices dated Sept. 25, one for bid price and one for market value of listed securities below $35 million, each with a compliance date of March 24, 2027.

The NYSE American notice that best shows a balance-sheet trigger went to Southland Holdings. The contractor said in a Sept. 25 8-K that a notice dated Sept. 23 found it out of compliance with Sections 1003(a)(i) and (ii) of the Company Guide, which require stockholders' equity of $2.0 million or $4.0 million depending on loss history; Southland reported a stockholders' deficit of $248.2 million at June 30, 2026 and net losses in its last three fiscal years. A plan is due Oct. 23; compliance is required by March 23, 2028.

Read together, the filings describe three distress mechanics. Leslie's is a lender-led conversion in which the DIP coupons and the 9.50%, 7.00% and 7.50% premiums transfer value to suppliers of new money before the old term loan is exchanged for a 10% stake. Sangamo is a Section 363 sale where the science, not the debt, was the asset. Synergy shows a sub-$20 million accelerated loan taking a listed company off the exchange. The exchange notices are the earlier stage of the same pipeline: a 180-day bid-price clock, a 2028 equity cure date, a reverse-split vote the company cannot assure.

What is not yet known: whether the court grants the interim DIP order within the three-day milestone, how many term lenders outside the RSA elect into the DIP and equity raise, the size of the unsecured cash pool and the store-closure charges. The first-day declaration by CFO Jeff White sits with the claims agent, Kroll, whose case site was not accessible to us at publication. Leslie's Oct. 2 hearing deadline and Oct. 6 suspension date are the next fixed points.