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May 1, 2019 – The Debtors requested Court authority to (i) access $100mn in debtor-in-possession (“DIP”) financing, $50mn on an interim basis, and (ii) use of cash collateral [Docket No. 5]. The motion also provides detail as to the Debtors' anticipated exit financing arrangements, with all amounts borrowed under the requested DIP financing to be converted into a senior secured term loan exit facility.
The DIP motion states, “The Plan is the centerpiece of a series of interdependent agreements and financing commitments, each one critical to the others and necessary for the Debtors’ reorganization. One such financing commitment is the senior secured super-priority debtor in possession credit facility, the DIP Facility, proposed to be entered into by the Debtors, the DIP Lenders and the DIP Agent on the terms set forth in the DIP Loan Documents. Considering the highly consensual nature of the Debtors’ Cases, the Debtors intend to confirm the Plan and emerge from chapter 11 as expeditiously as possible—in which case the DIP Facility may not be necessary to fund the Debtors’ operations through bankruptcy. During the negotiations leading up to the execution of the RSA, uncertainty surrounding the Debtors’ available liquidity and their ability to financially weather these bankruptcy proceedings led the RSA Parties to seek access to postpetition funding for the Debtors. The Debtors and the other RSA Parties recognized it would be prudent and in the best interests of preserving the Company’s going-concern value to have access to the DIP Facility, if needed. The RSA, the Plan, and the DIP Orders provide the flexibility the Debtors need to either fund operations during these Cases, if necessary, or to draw upon the financing commitments contemplated therein upon emergence.
Irrespective of whether the Debtors’ draw on the DIP Facility, the relief sought by this DIP Motion is highly valuable to the Debtors and will provide: (a) the assurance of an available postpetition debtor-in-possession financing commitment to draw on, if necessary, in the form of a non-amortizing multiple-draw term loan facility in a fully committed amount of $100 million, (b) the consensual use of the Cash Collateral of the Prepetition Secured Parties (‘Cash Collateral,’ and together with the DIP Facility, the ‘DIP Financing’), and (c) a commitment for exit financing. Notably, if as anticipated, these Cases last for a short duration, the DIP Facility will unlikely be drawn and, subject to the satisfaction of applicable conditions, the DIP Lenders will instead directly fund the Exit Term Loan. The DIP Facility, if incurred, will be secured by first priority liens on, and security interests in, all of the Debtors’ unencumbered assets as of the date hereof (the ‘Petition Date’) and super-priority priming liens on, and security interests in, all of the Debtors’ assets that are encumbered as of the Petition Date. Having access to the DIP Financing, including the use of Cash Collateral, on the first day of these Casesis a prerequisite for the Debtors’ major stakeholders to support the Plan and is critical for the success of the Debtors’ reorganization efforts.”
Key Terms of DIP Facility:
- Borrower: Sungard AS
- Guarantors: The DIP Guarantors (collectively with the Borrower, the “Loan Parties”)
- Lending Parties: DIP Agent: Cortland Capital Market Services LLC DIP Lenders: Includes lenders from time to time party to the DIP Loan Agreement that are (i) lenders under the Prepetition Credit Agreement under one tranche of the DIP Facility (the “Tranche A DIP Facility”); and (ii) certain holders of Prepetition Notes under a separate tranche of the DIP Facility (the “Tranche B DIP Facility”).
- DIP Commitments: Total aggregate commitment of $100 million comprised of (i) the $87 million Tranche A DIP Facility and (ii) the $13 million Tranche B DIP Facility to be disbursed ratably between the Tranche A DIP Facility and Tranche B DIP Facility as Initial DIP Loans in the amount of $50 million (or lesser amount approved by the Court and set forth in the Interim Order, the loans advanced on such date, the “Initial DIP Loans”) (and, upon entry of the Final Order, additional draws of up to an aggregate amount $100 million less the amount of the Initial DIP Loans actually borrowed (the “Delayed Draw DIP Facility” and the loans advanced under the Delayed Draw DIP Facility, the “Delayed Draw DIP Loans” and, together with the Initial DIP Loans, the “DIP Loans”). Any amount not so allocated to the Tranche A DIP Facility or Tranche B DIP Facility shall be allocated to the DIP Backstop Parties in accordance with the terms of the DIP Loan Documents.
- Maturity: Unless converted to the Exit Term Loan, all obligations under the DIP Loan Documents will be due and payable in full in cash on the earliest of: (i) the date that is six months after the Closing Date; (ii) if the Final Order has not been entered by the Court on or before the applicable Milestone the date of the applicable Milestone; (iii) the date of acceleration of the DIP Loans and the termination of the DIP Lenders’ commitments under the DIP Facility pursuant to the terms of the DIP Loan Agreement; (iv) the date the Court orders a conversion of the Cases to a chapter 7 liquidation or the dismissal of the chapter 11 case of any Debtor; or (v) the substantial consummation, which has been confirmed by an order entered by the Court (the “Confirmation Order”) (such earliest date, the “Maturity Date”).
- Interest Rates Interest is payable at (a) LIBOR plus 7.50%; or (b) the Base Rate7 plus 6.50%; at the option of the Borrower, in each case payable in cash.
- Default Rate: Non-default interest rate plus an additional 2.00% on the DIP Loans and all overdue amounts (interest, fees). Default interest shall be payable in cash on demand.
The motion states, "The DIP Lenders have also agreed to provide the Debtors with exit financing. In short, all borrowings and undrawn commitments under the DIP Facility will, upon the satisfaction of applicable conditions, be converted into a senior secured term loan exit facility (the ‘Exit Term Loan’). In addition to the Exit Term Loan, upon emergence, the reorganized Debtors (a) intend to have access to a $50 million third-party senior secured revolver facility (the 'Exit Revolver') and (b) will have issued a $300 million senior secured takeback term loan facility (the ‘New Term Loan,’ and together with the Exit Term Loan and Exit Revolver, collectively, the ‘Exit Facilities’). Together, it is anticipated that the aggregate amounts committed under the Exit Facilities will be $450 million. These exit commitments, including the DIP Lenders’ agreement to, upon satisfaction of applicable conditions, convert their outstanding claims under the DIP Facility into claims under the Exit Term Loan (rather than seeking to be paid in cash in full), provide the Debtors at the outset of these Cases with a clear and reliable path to emerge from chapter 11 in an expeditious manner with a stronger balance sheet.
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