November 6, 2020 – The Court hearing the Smartours cases issued a final order authorizing the Debtors to (i) access the $841,642.28 balance of a $2.2mn debtor-in-possession (“DIP”) financing facility and (ii) continue using cash collateral [Docket No. 108]. Previously on October 22, 2020, the Court had authorized the Debtors to (i) access $496,548 in new term loans on an interim basis and (ii) roll-up $861,809.72 of prepetition loans [Docket No. 48].

The $2.2mn DIP financing package is being provided by prepetition senior lenders after a marketing effort failed to deliver third-party financing offers. In total, the financing consists of (a) $1.338mn in new money term loans and (b) the $862k of Roll-Up Loans.

Background

The DIP motion states, “After determining that the commencement of these cases was necessary, and in order to preserve the value of their estates, the Debtors, with the assistance of their professional advisors, explored various options with respect to post-petition financing. In the exercise of their business judgment, the Debtors determined that a financing proposal from their existing lenders under the Prepetition Credit Facility provided the Debtors with the best opportunity to emerge from these cases in a timely manner and maximize the value of their estates.

The DIP Facility consists of a $2.2 million senior secured super-priority facility provided by the Debtors’ existing lenders under the Prepetition Credit Agreement. Borrowings under the DIP Facility will be secured by a first priority lien on substantially all of the Debtors’ assets. The DIP Facility will permit the Debtors to fund the administrative expenses of these chapter 11 cases and will allow the Debtors to emerge from chapter 11. Without the funding provided by the DIP Facility, the Debtors will experience a near-term liquidity shortfall, which would require the Debtors to liquidate.

Absent the DIP Financing, access to Cash Collateral and the cooperation of key stakeholders at this critical early stage, the Debtors could (a) face an imminent liquidation of their assets; (b) face diminished customer confidence in the Debtors’ ability to provide travel services; and (c) undermine the support of important groups on whom the Debtors’ businesses and restructuring depend, which, in turn, would hinder their ability to preserve the value of their estates.”

Marketing Efforts

In a declaration in support of the DIP financing [Docket No. 11.3] the Debtors’ investment banker provides: “Based on the size and seniority of the Prepetition Credit Agreement, Ariste focused on trying to obtain postpetition financing that was either: (a) junior in right of payment to the Prepetition Lenders or; (b) sufficiently large to refinance and upsize the Prepetition Credit Agreement. Ariste received no formal or informal proposal to provide postpetition financing. In explaining to Ariste their reasons for declining to provide proposals, five (5) of the six (6) contacted third-parties that responded cited concerns about the loan-to-value of any proposed third-party postpetition financing, potential litigation risk tied to priming efforts and the relatively low return on invested dollars. 

Ultimately, after these extensive arm’s length negotiations, the Debtors entered into an agreement with the Prepetition Lenders containing the terms described in the DIP Financing Motion. The DIP Facility achieves the Debtors’ principal goals and objectives for postpetition financing. It quickly provides the Debtors with the capital they need to promptly file these chapter 11 cases. It provides the Debtors sufficient capital to fund these cases based upon current projections and it minimizes the risk of early litigation because, among other things, the Debtors obtained the Prepetition Lenders’ consent for the Debtors’ use of the Prepetition Lenders’ Cash Collateral in connection with entering into the DIP Facility. Without the funding provided by the DIP Facility, the Debtors will experience a near-term liquidity shortfall and may (a) face an imminent liquidation of their assets; (b) face diminished customer confidence in the Debtors’ ability to provide travel services; and (c) undermine the support of important groups on whom the Debtors’ businesses and restructuring depend, which, in turn, would hinder their ability to preserve the value of their estates."

Key Terms of the DIP Financing:

• Borrowers: SmarTours, LLC and SPST Holdings, LLC
• DIP Lenders: First Eagle Alternative Capital BDC, Inc., First Eagle Direct Lending Fund III, LLC, First Eagle Direct Lending Fund III (A), LLC, First Eagle Direct Lending CoInvest III, LLC and First Eagle Direct Lending Co-Invest III (E), LLC
• Commitment: Up to an aggregate principal or face amount of $496,548 on an interim basis and, upon entry of the Final Order, up to an aggregate principal or face amount of $1,338,190.28 (the “DIP Term Loans”) and (ii) a roll-up facility (the “Roll-Up Facility” and the loans thereunder, the “Roll-Up Loans”; the DIP Term Loans and the Roll-Up Loans, collectively, are the “DIP Loans”) in an aggregate amount not to exceed $861,809.72.
• Maturity/Termination Date: The earliest of: (i) Stated Maturity Date of December 31, 2020; (ii) the date on which the Obligations are declared to be, or otherwise become, due and payable in full due to the occurrence of an Event of Default; and (iii) the date of delivery of a Termination Notice
• Interest Rate: The Eurodollar Rate, one month Interest Period (each as defined in the Prepetition Secured Credit Documents) plus percent 6.75% per annum
• Default Rate: 2.00% per annum above the rate of interest otherwise applicable
• Fees: Unused Commitment Fee of 0.50% per annum based on on the actual daily amount during any calendar  quarter by which the Commitment exceeds the outstanding principal amount of the 
• Milestones: The Borrowers shall, or shall cause the following to occur, by the times and dates set forth below:

1. By no later than three (3) days following the Petition Date, the Borrower shall have filed the Chapter 11 Plan, Disclosure Statement, and the related motions seeking approval of the adequacy of the Disclosure Statement in each case, in form and substance reasonably acceptable to the Lenders and the Borrower;
2. By no later than twenty-eight (28) days following the Petition Date, the Bankruptcy Court shall enter an order approving the Disclosure Statement in form and substance reasonably acceptable to the Lenders and the Borrower;
3. By no later than forty-five (45) days following the Petition Date, the Bankruptcy Court shall enter an order confirming the Chapter 11 Plan in form and substance reasonably acceptable to the Lenders and the Borrower; and
4. By no later than sixty (60) days following the Petition Date, the effective date of the Chapter 11 Plan shall have occurred.

Prepetition Indebtedness

The table below summarizes the Debtors’ funded debt obligations as of the Petition Date:

Approved DIP Budget is attached to the Order [Docket No. 108] as Exhibit 2About the Debtors

According to the Petersen Declaration, “smarTours is a provider of direct-to-consumer, value-oriented travel experiences to a variety of domestic and global destinations. The Company offers both pre-packaged tours with pre-set departure dates for individual travelers (‘Series Tours’) and customized, private tours for 20+ person passenger groups (‘Private Tours’). Over 200,000 passengers have traveled with smarTours since the Company’s founding in 1996. In 2019 approximately 13,000 passengers traveled on one of the 50+ itineraries offered by the Company.”

Read more Bankruptcy News