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April 23, 2020 – The Court hearing the SpeedCast International Limited cases issued an order authorizing the Debtors (i) to access $35.0mn of new money debtor-in-possession (“DIP”) financing on an interim basis and (ii) use cash collateral [Docket No. 49].
The $35.0mn is part of a larger $180.0mn DIP financing package being provided by an ad hoc group of the Debtors' prepetition secured lenders (the "Ad Hoc Group," although some non-group prepetition lenders are also participating) and is comprised of (a) $90.0mn in new money term loans ($35.0mn now available and $55.0mn with a final DIP order, currently anticipated to be May 14th) and (b) $90.0mn in a two-stage roll-up to a second-out position term loan. The "two-stage" roll-up will see DIP lenders roll-up $90.0mn of prepetition debt in parallel with their new money term loan contributions; so a dollar of roll-up for each dollar contributed to the $35.0mn of new money interim term loans and then a further pro rata roll-up when the Debtors access the balance of the new money term loans (ie $55.0mn) upon issuance of a final DIP order.
The Debtors' DIP motion [Docket No. 27] states, “After exploring a variety of out-of-court transaction alternatives to recapitalize their businesses, and facing lasting distressed market conditions in key customer industries (exacerbated by the dramatic impact of the COVID-19 pandemic), the Debtors determined that the best path to properly restructure the Company and protect its operations and employees was to commence these chapter 11 cases. The Debtors have arrived here with the support of an ad hoc group of the Company’s prepetition secured lenders (the ‘Ad Hoc Group’), who have spent weeks working with the Debtors, first to provide necessary relief through a prepetition Forbearance Agreement, then to work with the Company to carefully consider restructuring and liquidity options, and now to provide the Debtors with access to a post-petition financing facility (the ‘DIP Facility’) and use of ‘cash collateral’ as such term is defined in section 363 of the Bankruptcy Code (the ‘Cash Collateral’). These are essential components of the Debtors’ restructuring strategy and vital to ensure the viability of the Company; without that financing, and all of its components, the Debtors would have no means of financing these cases and no path to an orderly restructuring.
The Debtors’ ability to continue their operations without interruption is essential for the Debtors to maximize the value of their estates for the benefit of all stakeholders, avail themselves of the ‘breathing room’ afforded by chapter 11, and best position themselves for a successful restructuring. To accomplish this, the Debtors desperately need additional liquidity. As of the Petition Date, the Debtors will only have approximately $30 million in cash on hand, approximately $21 million of which is subject to liens pledged in favor of the Prepetition Lenders (as defined herein) and constitutes Cash Collateral (as defined herein), and approximately $9 million of which is cash held by Debtors who are unrestricted subsidiaries (not Loan Parties under the prepetition debt facility). After conducting a marketing process, the Debtors were able to obtain a post-petition debtor-in-possession financing facility funded by the Ad Hoc Group and certain other prepetition secured lenders and agented by Credit Suisse AG, Cayman Islands Branch; no other actionable financing was available. The facility consists of senior secured, super-priority term loans in an aggregate principal amount of up to $180 million, consisting of: (i) a new money term loan facility in the aggregate principal amount of $90 million; and (ii) a two-stage roll-up to a second-out position term loan in the principal amount of $90 million (the ‘DIP Facility’). With approximately $680 million of prepetition funded indebtedness secured by liens on substantially all of the Debtors’ assets, coupled with challenging and uncertain market conditions, the DIP Facility is the best post-petition financing alternative reasonably available to the Debtors under the circumstances.
The Debtors have also reached an agreement for consensual use of the Prepetition Lenders’ Cash Collateral. Without access to Cash Collateral as a supplement to the DIP Facility funds, the Debtors would lack adequate liquidity to continue operations or consummate a chapter 11 restructuring, resulting in a value-destructive, piecemeal liquidation and the loss of thousands of well-paying jobs that are desperately needed during these unprecedented times.”
Key Terms of the DIP Facility:
- Borrower: SpeedCast Communications, Inc. (the “Borrower”).
- Guarantors: The DIP Guarantors and certain other subsidiaries of Parent (collectively, with the Borrower, the “DIP Loan Parties”).
- DIP Lenders: Nominally, each person listed on the credit agreement signature pages (although no actual names appear on filed draft).
- DIP Agent: DIP Agent and, collectively, with the DIP Lenders, the “DIP Secured Parties”).
- DIP Facility and Borrowing Limits:
- New Money DIP Loans: New money term loans in the aggregate principal amount of $90mn: (i) $35mn, upon entry of Interim Order, and (ii) $55mn following entry of the Final Order.
- Roll-Up DIP Loans: A two-stage roll-up to second-out position term loan in the principal amount of $90 million of the Prepetition Obligations: (i) upon the Syndication End Date (as defined in the DIP Credit Agreement) after entry of the Interim Order, loans under the Prepetition Credit Agreement held by the DIP Lenders in a principal amount of $35mn will be deemed exchanged for DIP Roll-Up Loans on a cashless, dollar-for-dollar basis; and (ii) after entry of the Final Order, Prepetition Loans held by the DIP Lenders in an additional principal amount of $55mn will be deemed exchanged for DIP Roll-Up Loans on a cashless, dollar-for-dollar basis.
- Interest Rate:
- New Money DIP Facility: LIBOR plus 8.0% for Eurocurrency Loan; 7.0% for ABR Loan. (2.0% LIBOR floor).
- Roll-Up DIP Facility: LIBOR plus 1.75% per annum.
- Default Interest Rate: For principal and interest, applicable rate listed above, plus 2.0%. For all other amounts, applicable ABR rate plus 2.0%.
- Maturity Date: Duration for Use of DIP Collateral: 9 months from the Petition Date.
- Fees, Expenses and Additional Payments: The DIP Facility also includes the following fees:
- Commitment Fee: 2.0% on the aggregate New-Money DIP Commitments as of the closing date of the DIP Facility, payable in the form of original issue discount.
- Delayed Draw Commitment Fee: 0.5% on the average daily unused amount of the New-Money DIP Commitment of such DIP Lender from and including the Closing Date, but excluding the Delayed Draw Termination Date.
- Exit Fee: 5.0% on the aggregate principal amount of the DIP Loans, payable in cash upon the maturity or acceleration of the DIP Facility or on the date of any prepayment and/or repayment, in whole or in part, of such DIP Loans.
- DIP Agent Fees: Certain fees to the DIP Agent in the amount and at the times specified in the letter agreements between the Borrower and the DIP Agent (the “DIP Facility Fee Letter”), filed contemporaneously herewith.
A final DIP hearing is scheduled for May 14, 2020.
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