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November 18, 2020 – The Court hearing the RTI Holding Company cases issued a final order authorizing the Debtors to (i) access the $5.9mn balance ($3.9mn new money) of an $18.5mn debtor-in-possession (“DIP”) financing facility being provided by TCW and Goldman Sachs Specialty Lending Group, L.P. (“GSSLG,” or "the Lender”) and (ii) continue using cash collateral [Docket No. 558]. On October 9, 2020, the Court had authorized the Debtors to access $12.6mn of the DIP financing on an interim basis [Docket No. 87].
Ultimately there is only $6.9mn of new money DIP financing available to the Debtors here, $3.0mn upon entry of an interim DIP order and now a further $3.9mn with this final order. The balance of the $18.5mn in terms loans, provided by certain prepetition lenders, are effectively roll-ups, $9.6mn with the interim order and $2.0mn with this final order.
The Debtors’ requesting motion [Docket No. 51] notes, “The Debtors seek authority to consummate a new senior secured debtor-in-possession financing facility with their existing Pre-Petition Lenders….The DIP Facility…will consist of term loans in the aggregate principal amount of $18.5 million (including a $9.6 million sub-facility to be used solely for the reimbursement of any draws under certain existing letters of credit). The DIP Facility includes a roll-up of the Debtors’ prepetition letter of credit facility (potential exposure of approximately $9.6 million) upon entry of the Interim Order and, upon entry of the Final Order, a roll-up of $2.0 million in prepetition bridge advances plus accrued and unpaid interest and related fees related thereto as of the date of the Final Order.
The new money advances that will be available to the Debtors under the DIP Facility total $6.9 million, of which $3.0 million will be available upon entry of the Interim Order. The DIP Facility will consensually prime the obligations of the Pre-Petition Parties as to the Pre-Petition Collateral…and will provide needed financing during the Debtors’ cases pending consummation of the Debtors’ contemplated chapter 11 plan.”
On marketing of the DIP facility, the Debtors add: “The Debtors contacted ten (10) potential financing sources (in addition to ongoing discussions with the Debtors’ current lender group) and six (6) potential funding sources subsequently executed non-disclosure agreements with the Debtors. The Debtors provided due diligence materials with respect to the Debtors to each of the six (6) parties. Three (3) parties submitted non-binding indications of interest.
The Debtors explored exit financing with each of the above parties as well. Of the three (3) parties who had submitted non-binding indications of interest, one (1) of them also proposed that their debtor-in-possession loan would convert into exit financing upon the successful consummation of a plan of reorganization, while two (2) parties indicated a likely desire to do so upon further review.
In particular, given the significant challenges facing the restaurant industry particularly during the Covid-19 period, the Debtors believed that it was particularly important to secure an attractive debtor-in-possession financing package that would also serve as a stepping stone into an exit facility. By having a debtor-in-possession financing commitment in hand, the Debtors are sending a strong message to the market that the Debtors have the capacity to successfully implement their anticipated restructuring.
After careful review of their financing options, the Debtors concluded that the DIP Lenders’ proposed terms would allow the Debtors to meet their goals and provide the Debtors with sufficient liquidity on economic terms that were superior to terms proposed by any other prospective lender. In connection with the DIP Facility, the DIP Lenders also provided a term sheet for exit financing that would continue to provide liquidity for the Debtors’ operations post-emergence.”
Key Terms of the DIP Facility
- Borrower: Ruby Tuesday, Inc. and certain Debtor subsidiaries, and RTI Holding Company, LLC as Borrower Representative.
- Guarantors: The remaining Debtors.
- DIP Agent: GSSLG.
- DIP Lender: TCW and GSSLG (GS Bank is the Issuing Bank for the Existing Letters of Credit).
- DIP Facility: A priming DIP Facility, with super-priority liens and super-priority administrative expense claims, in an amount of up to $18.5mn (including a $9.6mn sub-facility for any draws under the Existing Letters of Credit). The DIP facility includes a (i) roll-up of Existing Letters of Credit obligations (potential exposure of $9.6mn) upon entry of the Interim Order, (ii) upon entry of the Final Order, roll-up of $2.0mn of bridge advances made prior to the Petition Date plus accrued and unpaid interest and fees related thereto as of the entry of the Final Order and (iii) the total new money available is $6.9mn, of which $3.0mn will be available upon entry of the Interim Order.
- Interest Rate: The Loans shall bear interest on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof as follows: 1. if a Base Rate Loan, at the Base Rate, plus the Applicable Margin; or 2. if a LIBOR Rate Loan, at the Adjusted LIBOR Rate, plus the Applicable Margin. Notwithstanding anything to the contrary contained in the DIP Credit Agreement in no event shall (A) the Adjusted LIBOR Rate be less than 1.00% per annum or (B) the Base Rate be less than 4.00% per annum. “Applicable Margin” means (a) with respect to Loans that are LIBOR Rate Loans, a percentage, per annum, equal to 10.00% and (b) with respect to Loans that are Base Rate Loans, a percentage, per annum, equal to 9.00%. Per the Budget, the effective interest rate for the Term Loans under the DIP Facility is 11.0% per annum.
- Fees: Borrowers agree to pay to the Lenders: (i) commitment fees equal to (A) the average of the daily difference between (I) the aggregate Commitments then in effect and (II) the Term Loans outstanding at such time plus the Letter of Credit Usage at such time; multiplied by (B) 0.50% per annum and Letter of Credit Fees equal to 8.00% per annum on the maximum aggregate amount of available to be drawn under all Existing Letters of Credit payable quarterly in arrears and shared proportionately by the Lenders (including the Issuing Bank); (ii) borrowers further agree to pay directly to Issuing Bank for its own account the following Letter of Credit Fees: a fronting fee equal to (A) the average aggregate daily maximum amount available to be drawn under all Existing Letters of Credit (determined as of the close of business on any date of determination), multiplied by (B) 0.25%, per annum; and such documentary and processing charges for any transfer or payment of an Existing Letter of Credit as are in accordance with Issuing Bank’s standard schedule for such charges and as in effect at the time of such transfer or payment; and (iii) borrowers further agree to pay to the Lenders (i) upon the Closing Date, a commitment fee equal $3,700 and (ii) upon the Maturity Date, an exit fee equal to $3,700.
- Maturity: The earliest to occur of: (a) the date which is thirty (30) days after the Outside Date (as defined in the RSA) or such later date as agreed to by Administrative Agent and Lenders in accordance with the RSA; (b) acceleration of the Obligations due to the occurrence of an Event of Default; (c) the effective date of a confirmed plan of reorganization or liquidation that provides for payment in full in Cash of all Obligations owing under the DIP Facility and the Prepetition Obligations in accordance with the RSA or is otherwise acceptable to DIP Lenders in their respective reasonable discretion; (d) the date which is the closing date of any sale of all or substantially all of the Debtors’ assets; (e) the entry of an order by the Bankruptcy Court granting relief from the automatic stay permitting foreclosure of any assets of any Debtor, in any case, in excess of $250,000 in the aggregate; or (f) the date on which (i) any of the cases shall be dismissed or converted to a case under Chapter 7 of the Bankruptcy Code, (ii) a trustee under Chapter 11 of the Bankruptcy Code shall be appointed in any of the cases or (iii) an examiner having enlarged powers relating to the operation of the business of any Borrower or any Guarantor (beyond those set forth under Section 1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the Bankruptcy Code shall be appointed.
- Milestones: The Debtors shall implement the Restructuring Transactions (as defined in the RSA) in accordance with the DIP Milestones (as defined in the RSA) which shall include the following:
- Plan Milestones:
- Deadline to file Plan and Disclosure Statement: 3 Business Days after Petition Date,
- Deadline for approval of Disclosure Statement: No later than 45
- Voting deadline: 30 days after approval of Disclosure Statement
- Deadline for Plan confirmation: (i) 105 days after the Petition Date, or (ii) one 120 days after the Petition Date in the event that a Topping Bid is selected at any auction, the Bankruptcy Plan shall be confirmed (the “Outside Date”)
- Deadline for Plan effectiveness: 30 days after Plan confirmation
- Sale Milestones:
- Deadline for order naming approving FocalPoint as investment banker: Not later than 30 days after the Petition Date
- Deadline for filing bidding procedures motion: 3 days after the Petition Date
- Deadline for bidding procedures order: 20 days after Petition Date
- Deadline for auction: no earlier than 60 days and no later than 105 days after the Petition Date
- Deadline for sale hearing: 3 days after the auction
- Deadline to close sale: 60 days after the sale hearing; at which time the proceeds of such sale shall be used to pay the Lenders and the Pre-Petition Lenders until such time as they are paid in full in Cash.
- Plan Milestones:
DIP Budget (See Final DIP Order Exhibit B)
About the Debtors
According to the Debtors: “Founded in 1972 in Knoxville, Tennessee, Ruby Tuesday, Inc., is dedicated to delighting guests with exceptional casual dining experiences that offer uncompromising quality paired with passionate service every time they visit. From signature handcrafted burgers to the farm-grown goodness of the Endless Garden Bar, Ruby Tuesday is proud of its long-standing history as an American classic and international favorite for nearly 50 years. The Company currently owns, operates and franchises casual dining restaurants in the United States, Guam, and five foreign countries under the Ruby Tuesday® brand.”
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