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April 13, 2020 – The Debtor requested Court authority to (i) access $3.5mn of debtor-in-possession (“DIP”) financing ($750k on an interim basis) to be provided by prepetition lender Vince McMahon (interest rate 4.25%), and (ii) use cash collateral [Docket No. 7]. The balance of the $3.5mn DIP financing, which does not appear to include a roll-up, will be made available "from time to time" following the issuance of a final DIP order and will be largely used to help make payroll.
The DIP financing motion states: "As of the Petition Date, the Debtor’s cash on hand was approximately $5.6 million. Accordingly, without immediate access to the additional liquidity provided under the DIP Facility, the Debtor would be unable to cover payroll and other essential operating expenses in the near term necessary to preserve and maximize the value of its assets, and would be forced into liquidation to the detriment of all stakeholders.
In consultation with its professional advisors, the Debtor evaluated the cash requirements needed to fund necessary expenses and conduct a robust sale process in the Chapter 11 Case. As a result of these efforts, the Debtor has determined it is necessary and appropriate to enter into the DIP Facility with Vince McMahon (the “DIP Lender”), the lender under the Prepetition Secured Note and the Debtor’s founder and principal shareholder.
The DIP Facility is critical to the Debtor’s ability to (i) pay necessary operational expenses, including employee wages, and (ii) pay post-petition administrative claims. The DIP Facility will preserve and maximize the value of the Debtor’s estate, allowing the Debtor to pursue a Court-approved sale process in a non-compressed timeline and facilitate the administration of the Chapter 11 Case. Without access to the DIP Facility, the Debtor has insufficient cash on hand, and based on the Debtor’s liquidity forecast, the Debtor will not be able to generate sufficient levels of operating cash flow in the ordinary course of business to cover ongoing expenses and the projected costs of the Chapter 11 Case. Consequently, the Debtor will be forced to initiate chapter 7 proceedings and liquidate all of its assets. As a result, the Debtor believes that the availability of the funding provided by the DIP Facility at the start of the Chapter 11 Case is necessary for the Debtor to avoid immediate and irreparable harm."
Key Terms of the DIP Facility
- Borrower: Alpha Entertainment LLC
- Lender: Vincent K. McMahon
- Borrowing Limits: The aggregate principal amount of the DIP Facility shall not exceed $3,500,000. Borrowings under the DIP Facility shall be incurred as follows: (i) following the entry of an order by the Bankruptcy Court (in form and substance reasonably satisfactory to the DIP Lender) approving the DIP Facility on an interim basis (the “Interim DIP Order”) one or more draws of the DIP Facility in an amount not to exceed $750,000 in accordance with the Approved DIP Budget (the “Initial Availability”); and (ii) the remaining portion of the DIP Commitment will be made available from time to time following the entry of an order (in form and substance reasonably satisfactory to the DIP Lender) by the Bankruptcy Court approving the DIP Facility on a final basis (the “Final DIP Order”), in bi-weekly draws in accordance with the Approved DIP Budget, in each case subject to the terms and conditions set forth herein.
- Interest Rate: 4.25% per annum.
- Default Interest: 2% above the Interest Rate.
- Fees and Credit Party Expenses: DIP Lender Fees and Expenses. The Borrower shall be obligated to pay the reasonable and documented fees, costs, and expenses incurred by the DIP Lender in connection with the DIP Facility (the “DIP Fees and Expenses”), which amounts shall be added to the total amount due under the DIP Facility and payable on the Maturity Date. None of the DIP Fees and Expenses shall be subject to Court approval or required to be maintained in accordance with Guidelines of the United States Trustee and no recipient of any such payment shall be required to file with respect thereto any interim or final fee application with the Court.
- Maturity: The maturity date of the DIP Facility (the “Maturity Date”) shall be the earliest of (i) if a final order with respect to the DIP Facility has not yet been entered, May 12, 2020, (ii) the effective date of a Chapter 11 plan, (iii) the date of consummation of any sale of all or substantially all of the assets of the Debtor pursuant to Sections 363 or 1141 of the Bankruptcy Code, and (iv) the date of acceleration of the DIP Facility and the termination of the DIP Commitment following the occurrence of an Event of Default.
On March 25, 2020, the Debtor executed a senior secured promissory note (as amended, the “Prepetition SecuredNote”) with Vince McMahon in the principal amount of $7.0mn to provide the Debtor with liquidity in the face of a shortfall. All of the Debtor’s assets are collateral under the Prepetition Secured Note. Also on March 25, 2020, an initial advance of $5.0mn under the Prepetition Secured Note was made to fund, among other things, employee payroll. On April 9, 2020, the Debtor borrowed an additional $4.0mn under the Prepetition Secured Note, which was amended and restated to a principal amount of $9.0mn. As of the Petition Date, the Debtor has no other outstanding funded secured debt obligations other than the Prepetition Secured Note.
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