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March 25, 2021 – The Debtor filed a motion requesting authority to access $2.0mn in debtor in possession (“DIP”) financing, including $1.5mn on interim basis; with the $500k balance $500k to be made available with a final DIP order [Docket No. 7 with credit agreement attached].
To give a bit of perspective on just how fast the tables have turned on Greensill, the Debtor was obliged to turn to Lex Greensill after finding all other avenues to the modest $2.0mn of required financing shut. This in respect of a group that "provided $143 billion of financing to approximately 10 million customers and suppliers" in 2019.
The Debtor's motion states, “The Debtor intends to use this Chapter 11 Case to pursue a value maximizing transaction for the sale of the Finacity Equity (the ‘Finacity Sale Transaction’) to a successful bidder after the conclusion of a bidding and auction process overseen by the Court (the ‘Sale Process’). The Debtor requires access to the liquidity under the DIP Credit Agreement (the ‘DIP Facility’) to continue meeting ordinary course expenses and the cost of this Chapter 11 Case through the conclusion of the Sale Process.
As part of the Debtor’s preparations for this Chapter 11 Case, the Debtor and its advisors analyzed how much post-petition financing would be required to operate the Debtor’s business, conclude the Sale Process, and fund the administrative costs of this Chapter 11 Case. The Debtor’s post-petition financing needs are reflected in the budget attached as Exhibit 2 to the Proposed Interim Order (the ‘DIP Budget’). The Debtor believes that access to financing in accordance with the DIP Budget is essential to the preservation and maximization of its assets.
Obtaining post-petition financing is crucial to the success of this Chapter 11 Case. The Debtor believes that the DIP Facility will allow it to meet its liquidity needs for the duration of this Chapter 11 Case and will enable the Debtor to maximize the return to its estate from the Sale Process. In that regard, the DIP Budget reflects the Debtor’s reasonable judgment and projections as to the cash needs of its business over the next six weeks. The Debtor believes that the level of expenditures reflected in the DIP Budget is prudent for the preservation and maximization of the value of the estate."
On marketing of the DIP, the Debtor adds: "The Debtor discussed with the Administrators for GCUK and GCMC and a potential bidder for the Finacity Equity providing third party sources of financing for this Chapter 11 Case. Both parties declined. Given the lack of material assets (other than the Finacity Equity) and the Debtor’s lack of revenue, the Debtor did not believe there would be much interest from other potential sources.
Following these discussions, the Debtor sought financing from the Peter Greensill Family Trust (the ‘DIP Lender’), an affiliate of Alexander (Lex) D. Greensill, the Company’s ultimate shareholder. The DIP Lender agreed to extend the DIP Facility in an aggregate amount of $2 million, of which $1.5 million will be available immediately upon entry of the Proposed Interim Order (the ‘Interim Amount’) and the remaining $500,000 will be available following the Court’s entry of the Proposed Final Order.”
Key Terms of the DIP Facility:
- Borrower: Greensill Capital Inc.
- Lender: Peter Greensill Family Trust
- Term: The DIP Credit Agreement provides for a term of 365 days after the Petition Date or such earlier date that the Commitments are terminated pursuant to the DIP Lender’s exercise of remedies as a result of the occurrence of an Event of Default.
- Commitment: $2.0mn with $1.5mn on an interim basis
- Interest Rate: (i) Five percent (5%) per annum for the first sixty (60) days after the Initial Borrowing Date and (ii) twenty percent (20%) per annum for any period of time that a Loan is outstanding after such sixty (60) day period. At the Borrower’s election, all or a portion of the interest due may be payable in kind, with such interest amount added to, and made part of, the outstanding principal amount of Loan at maturity.
- Deadline to file the Sale Procedures Motion with the Bankruptcy Court within three (3) business days after the Petition Date
- Deadline to obtain entry of the Sale Procedures Order within ten (10) days after the Petition Date
- Deadline to obtain entry of a Sale Order as promptly as practicable and in any event within sixty (60) days after the Petition Date and
- Deadline to conduct the closing of such sale as promptly as practicable after entry of the Sale Order
- Use of Proceeds: All proceeds of the DIP Loans shall be used only for the following: (i) fund payroll obligations, other operating expenses and general corporate and working capital requirements of the borrower, and administrative expenses of the Chapter 11 Case, in each case in compliance with the terms hereof and as set forth in the budget, (ii) make any prepetition payments to the extent permitted, (iii) pay restructuring fees and expenses and any other fees and expenses covered by the carve-out, and (iv) pay costs, expenses, interest and other obligations owing to the lender under the DIP Facility. Notwithstanding the foregoing, none of the proceeds of the loans have or will be contributed to, invested in, advanced to or otherwise used for the benefit of Finacity.
- Fees: Exit Event Payment: (i) if an Exit Event occurs within the first thirty (30) days of the Initial Borrowing Date, $50,000, (ii) if an Exit Event occurs more than thirty (30) days after the Initial Borrowing Date but within (60) days of the Initial Borrowing Date, $100,000, and (iii) if an Exit Event occurs more than sixty (60) days after the Initial Borrowing Date, $200,000.
The Debtor has no revenue and no secured debt.
In order to satisfy obligations in the ordinary course, such as payroll and lease obligations, the Debtor borrowed from GCUK pursuant to a Call Account Loan Agreement, dated January 1, 2019 (as may be amended, modified, and/or supplemented from time to time, the “Intercompany Revolver”), which provided for a commitment of $40 million for an unsecured loan facility, the proceeds of which were to be used for general corporate purposes. As of the Petition Date, the outstanding amount owed to GCUK under the Intercompany Services Agreement and the Intercompany Revolver was approximately $51 million (the “Intercompany Balance”).
Prior to the Petition Date, the Debtor was also party to an intercompany aircraft agreement, dated May 2018 (the “Intercompany Aircraft Agreement”), with Greensill Capital (IOM) Limited (“Greensill IOM”), a direct, wholly owned subsidiary of GCMC and an affiliate of the Debtor. On March 19, 2021, the Debtor terminated the Intercompany Aircraft Agreement by providing notice to Greensill IOM, and Greensill IOM asserted that the Debtor owes a balance of €40,511.99, which the Debtor disputes.
Other than outstanding employee claims, rejection damages arising from a New York Office lease and the Intercompany Balance, the Debtor does not anticipate any other material claims against it.
Greensill Capital Management (UK) Limited (in administration) owns 100% of the Debtor’s equity.
DIP Budget [Exhibit 2 of Docket No. 7]
About the Debtor
According to the Debtor: “The Company was founded by [Alexander (Lex) D.] Greensill in 2011 as a financial services company to provide supply chain financing, working capital solutions and related services. Until the appointment of the Administrators, the Company also operated a bank through a German subsidiary. The Company arranged factoring and reverse factoring programs for clients globally….
Historically, the Debtor served as the base for the Company’s sales force in the United States and the Americas and employed more than 70 employees across 13 states as of January 1, 2021. The vast majority of the Debtor’s employees were located at the NY Office. The Debtor’s employees sold the Company’s products and services to clients and investors in the Americas and all revenue arising therefrom went directly to Greensill Capital (UK) Limited (‘GCUK’). In June 2019, the Debtor acquired Finacity Corporation and its subsidiaries (collectively, ‘Finacity’). Finacity is a leader in the structuring and provision of asset-backed working capital funding solutions, consumer receivables financing, supplier and payables financing, back-up servicing and transaction reporting around the world.”
Corporate Structure Chart
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