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[Just filed. Developing story.] December 21, 2020 – Renovate America, Inc. and one affiliated Debtors (“Renovate” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 20-13172. The Debtors, operators of a home improvement financing platform, are represented by Mette H. Kurth of Culhane Meadows LLP. Further board-authorized engagements include (i) Bryan Cave Leighton Paisner LLP as general bankruptcy counsel, (ii) Armanino LLP as financial advisors and investment banker, (iii) B. Riley Advisory Services as restructuring advisor and (iv) Stretto as claims agent.
The Debtors’ lead petition notes between 50,000 and 100,000 creditors; estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $100.0mn and $500.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) SFII Rancho Bernardo, LLC ($13.6mn rent claim), (ii) State of California ($2.7mn legal settlement claim) and (iii) Larson O'Brien LLP ($891k professional services claim).
Following several aborted efforts at selling assets (COVID-19 resulting in "reduced liquidity for home improvement lending… [and]… a significant dislocation in the M&A market for consumer lending companies"), and with one of their two main lines of business now effectively closed to new business, the Debtors have entered into a stalking horse asset purchase agreement (the "APA") with Finance of America Mortgage LLC ("FAM" or the “Stalking Horse Purchaser”) in respect of the Debtors' remaining, or "Benji" assets. Further to the terms of the APA [Docket No. 10, Exhibit C], the Stalking Horse Bidder will purchase the Debtors' Benji business for $5.0mn in cash and amounts outstanding under the DIP financing facility that FAM will be making available to the Debtors.
The Debtors' bidding procedures motion provides: ”Historically, the Debtors maintained two business divisions: HERO and Benji. The Debtors’ HERO business, which ceased accepting homeowner’s applications in October of 2020…Benji, the Debtors’ remaining business division, provides home improvement financing to contractors and homeowners. Pursuant to this Motion, the Debtors are seeking approval of the Bidding Procedures to establish a clear and open process for the solicitation, receipt, and evaluation of third-party bids for the purchase of certain of the Debtors’ remaining Assets—comprised of their Benji business—a process that began prepetition and will continue postpetition.
Specifically, the Debtors and Finance of America Mortgage LLC (the 'Stalking Horse Purchaser') entered into an Asset Purchase Agreement, dated as of December 21, 2020…whereby the Stalking Horse Purchaser proposes to purchase substantially all of the Assets for, among other things, cash consideration of $5 million (the Purchase Price'), which will serve as a competitive baseline of recovery for the Debtors’ stakeholders. The proposed transaction, if approved, will generate significant value for the Debtors’ estates, and among other things, satisfy a significant portion of the prepetition claims against the Debtors and pave the way for confirmation of a chapter 11 plan."
The Debtors have commitments for $50.0mn of debtor-in-possession ("DIP") financing, $18.0mn on an interim basis, from FAM.
- PEFI Credit Agreement: Debtor Personal Energy Finance, Inc. (“PEFI”) is the borrower under a December 2019 loan and security agreement (the “PEFI Credit Agreement”) with ING Capital, LLC, as administrative agent and the initial lender (in such capacity, the “PEFI Agent”), TMF Group New York, LLC, as collateral agent, and the lenders from time to time party thereto (collectively, the “PEFI Lenders”).
The PEFI Credit Agreement provides for a senior secured warehouse credit facility with a maximum amount of $35.0mn (the “PEFI Warehouse Facility”), of which $25.0mn is committed and $10.0mn is uncommitted. Immediately prior to the Petition date, (1) the aggregate principal amount outstanding under the PEFI Warehouse Facility was $6,000,000, of which approximately $2,779,473 has been used to purchase certain contracts constituting the PEFI Lenders’ collateral, and the remainder of which remains unused and in escrow (such amounts owed to the PEFI Lenders, together with any accrued and unpaid interest, fees, expenses and disbursements payable under the PEFI Credit Agreement the “Prepetition PEFI Warehouse Obligations”).
- RAI Credit Agreement: Debtor Renovate America, Inc. (“RAI”) is the borrower under an August 2017 credit agreement (the “RAI Credit Agreement”) with ING Capital LLC, as administrative agent and the initial lender (in such capacity, the “RAI Agent”), Cortland Capital Market Services LLC, as collateral agent, and the lenders from time to time party thereto (collectively, the “RAI Lenders”). The RAI Credit Agreement provides for a senior secured warehouse credit facility with a maximum commitment of approximately $1.3mn (the “RAI Warehouse Facility”).
Immediately prior to the Petition Date, the aggregate principal amount outstanding under the RAI Warehouse Facility was approximately $1,252,944 (such amount owed to the RAI Lenders, together with any accrued and unpaid interest, fees, expenses and disbursements payable under the RAI Credit Agreement, the “Prepetition RAI Warehouse Obligations”).
About the Debtors
According to the Debtors: “Renovate America offers a financing platform that helps Americans improve their homes while giving contractors the tools they need to grow their business. In addition to financing home improvements through a traditional lending product, Benji, Renovate America also offers participating communities HERO financing. HERO is a leading residential Property Assessed Clean Energy (PACE) program in the U.S. and has been used by the owners of over 130,000 homes to make upgrades that can save energy and water, generate renewable energy, or protect against storm damage. HERO-financed upgrades are projected to save homeowners billions of dollars in energy and water bills, and are estimated to have created over 25,000 local trade jobs that cannot be offshored or automated.
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