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January 17, 2019 – The Debtors requested Court authority to (i) enter into interim and final debtor-in-possession (“DIP”) financing arrangements with SPECIAL SITUATIONS INVESTING GROUP, INC., as administrative agent and as collateral agent for the Lenders and (ii) use cash collateral [Docket No. 33]. The DIP financing is a $30mn new money multiple draw term loan facility (the “New Money DIP Facility”) consisting of a $10mn Class A tranche and a $20mn Class B tranche; with the entire $30mn available for draw down on the closing date. A draft of the New Money DIP Facility is attached to the motion.
The motion states, “Due to the fact that all of the Debtors’ material domestic assets are encumbered, and in light of the overall weakness in the apparel retail industry, the availability of postpetition financing for the Debtors was severely restricted….Relatedly, the Debtors could not provide evidence or certainty of a sufficient equity cushion to allow for debtor-in- possession financing that would prime the liens of the Prepetition Secured Parties over their objections. For the same reason, no third parties, other than the Debtor’s existing lenders, was willing to provide debtor-in-possession financing junior to the Debtors’ prepetition facilities, and the Debtors did not receive any viable offers from third parties despite their marketing efforts….Concurrently with ‘shopping’ postpetition financing to the financial community at large, the Debtors approached its Prepetition Secured Parties to explore financing options. On January 9, 2019, the Debtors received a proposal from the Prepetition Term Loan Lenders…After arms’-length, good faith negotiations, the Prepetition Term Loan Lenders agreed to provide the postpetition financing…
The DIP Facility provides the Debtors with the funding needed to pay expenses during the pendency of the cases and to pursue a path to maximize the value of their assets. Absent the DIP Facility, the Debtors would run out of cash and be forced to immediately liquidate, resulting in significant harm to the Debtors’ thousands of employees (through immediate loss of employment), vendors (through loss of future orders), and landlords (through loss of a future rent payments). In contrast, access to the DIP Facility would provide the Debtors with sufficient liquidity to liquidate their inventory in an orderly fashion and maximize the value of certain of their brands. Additionally, by obtaining financing from the Prepetition Term Loan Lenders, the Debtors avoid a costly and time-consuming priming fight at the outset of these chapter 11 cases and save significant time that third party lenders would have expended on due diligence.”
Summary of the Material Terms of the Proposed DIP Financing (defined terms are as defined in the New Money DIP Facility)
- Guarantors: Gymboree Intermediate Corporation, Gymboree Retail Stores, LLC, Gymboree Manufacturing, Inc., Gymboree Operations, Inc., Gym-Mark, Inc., Gym-Card, LLC, Gymboree Wholesale, Inc., and Gymboree Distribution, Inc.
- Entities with Interests in Cash Collateral: Prepetition Term Loan Lenders under the Prepetition Term Loan Agreement and the Prepetition ABL Lenders under the Prepetition ABL Agreement.
- Interest Rate:
- With Respect to Class A DIP Loans, either LIBOR plus 8.25% per annum (subject to a 2% LIBOR Floor) or Adjusted Base Rate plus 7.25% per annum.
- With Respect to Class B New Money DIP Loans, either LIBOR plus 11.25% per annum (subject to a 2% LIBOR Floor) or Adjusted Base Rate plus 10.25% per annum.
- Fees: The following fees are payable in connection with the DIP Loans:
- A Commitment Fee of 2% of the aggregate principal amount of the New Money DIP Loans, payable on the Closing Date.
- An Agency Fee set forth in the Fee Letter, payable on the Closing Date.
- A Make-Whole Amount, payable in the event the Class A DIP Loans are voluntarily prepaid or mandatorily prepaid upon consummation of an asset sale or receipt of casualty proceeds, letter of credit proceeds, or other extraordinary receipts, a Make-Whole amount equal to 4.25% of the principal of such prepaid Class A DIP Loans plus all interest that would have been payable on such loans through the Stated Maturity Date.
- Term: Stated Maturity Date – The earliest of (i) the date that is 210 days after the Petition Date, (ii) if the Final Order has not been entered, the date that is 35 calendar days after the Petition Date, (iii) the acceleration of the DIP Loans, and (iv) the effective date of an Acceptable Plan (as defined in the DIP Agreement).
- Roll-up: The DIP Documents provide for a roll-up the Prepetition Term Loan Facility. Under the terms of the DIP Agreement, upon entry of the Interim Order, the Initial Roll-Up DIP Loans will be rolled-up into loans deemed outstanding under the DIP Facility. Upon entry of the Final Order, the Final Order Roll-Up DIP Loans will be converted.
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