December 13, 2018 – The Court hearing the Parker Drilling case approved [Docket No. 80] the Debtors’ $50.0mn superpriority asset-based revolving credit facility (the “DIP Credit Facility”) provided by Bank of America, N.A. (“Bank of America”) and Deutsche Bank AG New York Branch (“Deutsche Bank,” and together with Bank of America, the “DIP Lenders”), with Bank of America also acting as the administrative and collateral agent (the “DIP Agent”). $15mn of the DIP Credit Facility was made available on an interim basis with access to the balance subject to a final order.
The motion requesting DIP financing approval [Docket No. 23] stated, “The Debtors need access to additional liquidity in the near-term…the Debtors have only approximately $8.1mn of unrestricted cash on hand….If approved, the Debtors will use the proceeds of the DIP Credit Facility to, among other things, honor employee wages and benefits, procure goods and services, fund general and corporate operating needs and the administration of these chapter 11 cases.”
Key Terms of the DIP Facility (Defined terms are as defined in the motion):
Borrowers: Parker, Parker Drilling Arctic Operating, LLC, Parker Drilling Offshore USA, L.L.C., and Quail Tools, L.P.
Guarantors: All of the Debtors that are not Borrowers
Administrative Agent: Bank of America
DIP Lenders: Bank of America and Deutsche Bank
Term: The maturity date with respect to the DIP Credit Facility shall be the earliest of:
(a) four months after the Petition Date, provided that, upon payment of an extension fee, such date shall be extended by two additional months;
(b) the Effective Date;
(c) the date of acceleration of the DIP Credit Facility in accordance with its terms;
(d) the entry of an order pursuant to section 363 of the Bankruptcy Code approving the sale of substantially all of the Loan Parties’ assets;
(e) the conversion of any of the cases to a case under chapter 7 of the Bankruptcy Code; and
(f) dismissal of any of the Cases.
Loan Commitment: Total aggregate commitment of $50.0mn pursuant to a super priority and priming asset-based revolving credit facility. The amount of each DIP Lender’s commitment is set forth on Schedule 2.1 to the DIP Credit Agreement. $20.0mn of the DIP Credit Facility shall be available for standby letters of credit (the “DIP L/Cs”), issued by Bank of America and Deutsche Bank.
- The DIP Credit Facility shall accrue interest per annum at a variable interest rate, which is set at Parker’s election at: (a) the one-month London Interbank Offered Rate (“LIBOR”), plus 4.00% (“Applicable LIBOR Margin”); or (b) the DIP Agent’s prime rate, plus 3.00% , in each case payable in cash monthly. Fees on Outstanding DIP L/Cs: All outstanding DIP L/Cs will also incur a fee at a per annum rate equal to the Applicable LIBOR Margin.
- Default Rate: Default interest rate of an additional 2.0% per annum upon the occurrence and during the continuance of an Event of Default.
- Undrawn Facility Fee: An undrawn facility fee equal to 0.50% of the undrawn portion of the DIP Credit Facility, accruing daily and payable monthly in cash in arrears.
- Fronting Fee: A fronting fee in an amount to be agreed (but in any event not to exceed 0.125% per annum) on the then available face amount of each DIP L/C, to be payable monthly in arrears to the account of the relevant Issuing Bank.
Use of DIP Credit Facility and Cash Collateral: The proceeds of the DIP Credit Facility shall be used to: (a) pay fees, interest, payments, and expenses associated with the DIP Credit Facility; (b) to provide liquidity for the ongoing working capital and capital expenditure needs of the Debtors during the pendency of these chapter 11 cases; (c) fund the Carve Out; and (d) fund the administrative costs of these chapter 11 cases, including payment of professional fees, in each case, subject to the Budget and in accordance with the DIP Orders, as applicable.
- DIP Agent and DIP Lender Fees: All reasonable and documented out-of-pocket fees and expenses of the DIP Agent, the Issuing Banks, and the DIP Lenders associated with: (a) the preparation, execution, delivery, and administration of the DIP Documents incurred on or after the effective date of the DIP Credit Facility (the “DIP Effective Date”); (b) the enforcement of the Loan Documents (as defined in the DIP Credit Agreement); and (c) with respect to the DIP Agent only, any field exams and inventory appraisals required to be undertaken.
- Fee Letter: Fees will be earned and paid on the closing date of the DIP Credit Facility to the DIP Secured Parties on account of the DIP Credit Facility as contained in the Budget line item “Interest and Bank Fees” pursuant to the confidential fee letter, substantially in the form annexed as Exhibit 3 to Exhibit A (the “Fee Letter”).
The Interim Order and DIP Credit Agreement contain the following milestones:
- Entry by the Court of the Final DIP Order within 40 days after the Petition Date
- Entry by the Court of orders approving (i) the Disclosure Statement, (ii) the Rights Offering Procedures, and (iii) an order approving the Exit Facility Commitment Letter and Exit Facility Fee Letter, in each case within 45 days after the Petition Date
- Entry by the Court of the confirmation order by no later than 91 days after the Petition Date
- The effective date of the Plan shall have occurred by no later than the later of (i) 106 days after the Petition Date and (ii) 15 days after the confirmation order is entered.
Liens and Priorities: Subject to the Carve Out, the Debtors’ obligations under the DIP Credit Facility will: (a) be secured by a perfected first-priority priming lien on substantially all of the Debtors’ assets (the “Priming Lien”); and (b) constitute allowed super-priority administrative expense claims, pursuant to section 364(c) of the Bankruptcy Code, having priority over all administrative expenses specified in or ordered pursuant to the Bankruptcy Code.
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