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As previously reported in respect of the CVR, “Holders of second lien debt will receive a cash recovery of 18%. They will also be entitled to their pro rata distribution of a cash pool to be determined based on the Company’s ability to hit certain business plan EBITDA targets in 2019 and 2020. In 2019, $4.1 million will be available to second lien holders if an EBITDA target of $280.1 million is obtained and a further $4.1 million payment is to be shared if $307.7 million of EBITDA is reached. In 2020, there are again two $4.1 million distributions to be had, these at EBITDA targets of $309.0 million and $339.5 million, respectively. The result is that, if all four targets are reached, second lien debt holders could see a total recovery of @25%.”
The detailed calculations as to the CVR are as follows, “Subject to the terms set forth in Article III.B.10 of the Plan, the CVR Agreement and the CVR Certificates, each holder of a CVR Certificate as of the relevant CVR Record Date shall be entitled to its pro rata distribution of up to $16,266,864.25, payable on a joint and several basis by all of the Reorganized Debtors under the following terms and the terms set forth in the CVR Agreement, on the date that is not later than the first Business Day that is 90 days after the end of the fiscal year noted below (the ‘CVR Distribution Date’). The Contingent Value Rights Cash Pool shall be memorialized in the CVR Agreement in accordance with the Plan and will include terms materially consistent with the terms set forth below:
- If Adj. EBITDA is less than $280,108,806.37 in FY2019, no payments shall be paid to the Contingent Value Rights Cash Pool for FY2019. If Adj. EBITDA exceeds $280,108,806.37, a distribution of $4,066,716.06 shall be paid out on account of the CVR. If Adj. EBITDA exceeds $307,713,015.40 in FY2019, a further distribution of $4,066,716.06 shall be paid out on account of the CVR.
- If Adj. EBITDA is less than $309,046,620.93 in FY2020, no payments shall be paid to the Contingent Value Rights Cash Pool for FY2020. If Adj. EBITDA exceeds $309,046,620.93, a distribution of $4,066,716.06 shall be paid out on account of the CVR. If Adj. EBITDA exceeds $339,544,611.42 in FY2020, a further distribution of $4,066,716.06 shall be paid out on account of the CVR.
- If any Pay-out Threshold set forth above for any fiscal year is not achieved, then no payment shall be made to any Holder of a CVR Certificate in respect of such applicable Pay-out Threshold for such fiscal year irrespective of the achievement of one or more thresholds in any other fiscal year. Each Pay-out Threshold and entitlement to payment thereon shall be determined on a standalone basis irrespective of whether or not any other Pay-out Threshold is met.
- The CVR Agreement shall include covenants that protect the rights of Holders of CVR Certificates if a Reorganized Debtor engages in a transformative transaction. For instance the Reorganized Debtors shall cause any purchaser of all or substantially all of the Reorganized Debtors’ assets or an acquisition of all or substantially all of the Reorganized Claire’s Parent Interests, or a change of control, to assume the obligations of the Reorganized Debtors under the CVR Agreement and CVR Certificates.”
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