Orchids Paper Products Company – Seeks $11.0mn in DIP Financing, $4.0mn on Interim Basis, and Use of Cash Collateral

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April 1, 2019 – The Debtors requested Court authority to access $11.0mn in debtor-in-possession (“DIP”) financing ($4.0mn on interim basis) to be provided by Orchids Investment (“OI” or the “DIP Lender”) and (ii) use of cash collateral [Docket No. 18]. OI, an affiliate of stakeholder Black Diamond Capital Management, L.L.C. , is also the presumptive stalking horse bidder (opening credit bid of $175.0mn) in a planned section 363 sale process.

The DIP motion states, “At the present time, the Debtors are unable to sufficiently generate cash to operate their business or satisfy their obligations under the Prepetition Financing Documents. Given the Debtors’ current financial condition, financing arrangements, and capital structure, the Debtors have an immediate need to obtain the DIP Facility and to use Cash Collateral to permit the Debtors to, among other things, continue the orderly operation of their business, maximize and preserve their going concern value, make payroll and satisfy other working capital and general corporate purposes, and pay other costs, fees and expenses associated with administration of the Chapter 11 Cases. In the absence of the authority of this Court to borrow under the DIP Facility and use Cash Collateral, the Debtors’ estates would suffer immediate and irreparable harm.”

Key Terms of the DIP Facility:

  • Borrower: Debtor Orchids Paper Products Company
  • Guarantors: Debtor Orchids Paper Products Company of South Carolina, Non-debtor Orchids Mexico (DE) Holdings, LLC and Non-debtor Orchids Mexico (D) Member, LLC
  • DIP Lenders: Orchids Investment LLC, as DIP lender and Black Diamond Commercial Finance, L.L.C. as DIP agent
  • Entities with Interests in Cash Collateral: Orchids Investment LLC, as prepetition lender Ankura Trust Company, as prepetition agent.
  • DIP Facility: The DIP Facility consists of a senior secured superpriority loan up to an aggregate amount of $11.0mn. with $4.0mn available on an interim basis
  • DIP Term: The DIP Facility will terminate upon September 30, 2019, or any earlier date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms of the DIP Credit Agreement
  • Interest Rate: A per annum rate equal to twelve percent (12%). The DIP Facility is also subject to certain fees as set forth in Section 2.4 of the DIP Credit Agreement
  • Default Rate: A per annum rate equal to two percent (2%) higher than the non-default rate

The following documents were attached to the DIP motion:

  • Exhibit No. 1: Form of Interim DIP Order
    • Exhibit A to Interim Order: DIP Credit Agreement
    • Exhibit B to Interim Order: Approved Budget
    • Exhibit C to Interim Order: Milestones
  • Exhibit No. 2: Declaration of Jeffrey Lewis in Support of Debtors for Entry of Interim and Final Orders

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