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April 30, 2019 – The Court hearing the Vanguard Natural Resources cases issued an order authorizing the Debtors to (i) access $130.0mn in debtor-in-possession (“DIP”) financing on a final basis, comprised of (a) a $65.0mn revolving facility (the “DIP Revolving Facility”) and (b) a $65.0mn roll up (the “Roll Up”) of each DIP lender’s ratable share of the outstanding principal amount of the Debtors’ prepetition revolving loans, and (ii) Use of Cash Collateral [Docket No. 241].
Previously, on April 4, 2019, the Court authorized the Debtors to access $20.0mn in DIP financing on an interim basis [Docket No. 118].
As previously cited from the Debtors' DIP motion, “Faced with limited liquidity, the Debtors, with the assistance of Evercore Group L.L.C., engaged in discussions with a number of third-party institutions regarding the terms of postpetition financing. Due to, among other things, the challenges and costs inherent in pursuing a ‘priming’ fight with the Debtors’ existing secured lenders, none of the parties contacted were willing to provide such financing. Accordingly, the Debtors simultaneously engaged with a steering committee (the ‘SteerCo’) of lenders under their prepetition first lien credit facility…and Citibank, N.A., the administrative agent under the Debtors’ then-existing revolving credit facility and term loan…regarding a viable solution from within their capital structure. Following intense, good faith, and arm’s-length negotiations, the Debtors ultimately agreed to the terms of a $130 million superpriority, priming secured revolving DIP facility (the ‘DIP Facility’).
The DIP Facility provides $65 million of new money and, subject to entry of the Final DIP Order…, refinances $65 million of the outstanding principal amount of the Debtors’ revolving loans under the Prepetition First Lien Credit Agreement (the ‘Revolving Loans’). The DIP Facility allows the Debtors to immediately access up to $20 million upon entry of the Interim DIP Order…to not only continue to pay their operating expenses and signal to their customers, vendors, and employees that operations will continue in the ordinary course during the chapter 11 cases, but also to provide a critical breathing spell in which to continue to negotiate a comprehensive transaction with their key stakeholders.
Key Terms of the DIP Financing
- Borrower: Vanguard Natural Gas, LLC (“VNG”)
- Guarantor: (a) Vanguard Natural Resources, Inc. (“Vanguard”) and (b) each of Vanguard’s existing and future domestic subsidiaries, including, without limitation, the guarantors party to the Prepetition First Lien Credit Agreement.
- Administrative Agent: Citibank, N.A. (in such capacity, the “DIP Agent”).
- DIP Lenders: The lenders from time to time party to the DIP Credit Agreement (collectively, the “DIP Lenders” and, together with the DIP Agent, the “DIP Secured Parties”).
- Commitment: $130 million, of which $65 million shall comprise the DIP Revolving Facility and, upon entry of the Final Order, $65 million shall comprise the Roll Up. The DIP Revolving Facility shall include a sub-facility of up to $5,000,000 for the issuance of letters of credit (“Letters of Credit”), which shall reduce availability under the DIP Revolver Facility on a dollar-for-dollar basis.
- Interest Rates: LIBOR plus 5.50% (the “LIBOR Margin”), subject to a LIBOR floor of 0.00%.
- Fees: The DIP Facility also includes the following fees: (i) the Commitment Fee of 1.00% per annum on all undrawn Commitments, payable to the DIP Lenders monthly in arrears; (ii) the Structuring Fee of $1,250,000 payable to the Lead Arranger in cash on the Closing Date; (iii) the Underwriting Fee in an aggregate amount equal to 1.50% of the DIP Revolving Facility, payable to the Lead Arranger in cash on the Closing Date; (iv) the Administrative Fee in an amount equal to $50,000 per annum, payable to the DIP Lenders in cash; and (v) the Letter of Credit fee (due monthly) equal to the product of the LIBOR Margin and the undrawn amount of each Letter of Credit and a fronting fee equal to the product of .035% and the undrawn amount of each Letter of Credit
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