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DIP Loans: A Common Sense Assessment of "Extraordinary Provisions"
By Elliot Ganz and Allison Hester-Haddad
Do DIP loans help companies preserve their going-concern value? That question is fundamental to the current debate over reforming Chapter 11 generally and the DIP market in particular. Yet few commentators have considered it before proposing limits on many of the common terms in DIP loans. Steven B. Levine, R. Benjamin Chapman, and Priya F. Salvam's recent article in The Secured Lender, "The New Rules of the Game for DIP Financing," exemplifies this trend. They use evidence that certain terms-the so-called "extraordinary provisions"- are common in DIP loans to suggest that these terms are somehow "onerous".
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Leveraged Loan Issuance Reaches All-time High in Q2: Thomson Reuters LPC U.S. Lending Review 
Home Inns & Hotels Management Inc., a Leading Economy Hotel Chain in China, Completes the Refinancing of its US Dollar Denominated Term Loan on June 28, 2013; The Outstanding Balance of the Term Loan, Which was Due in September 2015, was $117 Million
Great American Group Observes Improved Performance in the Wine and Spirits Industry
Carpenter Technology Corporation (CRS) Announces the Successful Completion of a $500 Million Syndicated Credit Facility; This Five-year Revolving Line of Credit Replaces the $350 Million Revolver Due to Expire in June 2016; Bank of America Merrill Lynch and J.P.Morgan Securities Served as the Joint Lead Arrangers
U.S. Silica Announces Intent to Refinance Existing Senior Secured Facility by Entering Into a New $425 Million Senior Secured Credit Facility, Consisting of a $375 Million Term Loan and a $50 Million Revolving Credit Facility
Ares Commercial Real Estate Corporation Expands Capacity and Improves Terms on Credit Facility; Wells Fargo Facility Increased by $52.5 Million to $225 Million
Sotheby's and Certain of its Wholly-owned Subsidiaries are Party to a Credit Agreement With an International Syndicate of Lenders led by General Electric Capital, Corporate Finance, Which Provides for a Borrowing Capacity of up to $300 Million and Matures in December 2017
Alabama County Files Exit Plan to End $4.2 Billion Bankruptcy
Great American Group Observes Modest Progress for the Domestic Textiles Industry, Despite Margin Erosion TUI Travel, the World's Largest Tour Operator, Signs a New 300 Million Pound Bank Credit Facility With a Syndicate of Banks Coordinated by the Royal Bank of Scotland
Drillsearch Energy Limited Secures $50 Million Credit Facility With the Commonwealth Bank of Australia
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Bibby Financial Services provided the following deals: $1,500,000 factoring facility for a Minnesota-based apparel company; $1,000,000 factoring facility for an Ontario-based manufacturing company; $1,000,000 factoring facility for a Nevada-based company; $800,000 factoring facility for a Delaware-based electronics company; $750,000 for an Ontario-based packaging company; $650,000 for a Florida-based textile company; $500,000 for a Georgia-based technology company and $250,000 purchase order facility for a New Jersey-based retail company
FirstMerit Bank Business Credit announced it closed a new $5,500,000 revolving credit loan facility to Porcelain Industries, Inc. on May 1, 2013. Proceeds of the facility were used to refinance existing debt and provide ongoing working capital.
Porcelain Industries Inc. is a high performance surface protection company headquartered in Dickson, TN.
FirstMerit Bank Business Credit announced it closed a new $28,000,000 revolving credit loan and term loan facilities to Formed Fiber Technologies, Inc. on May 17, 2013. Proceeds of the facility were used to facilitate the purchase of the company by Detroit Technologies, Inc. ownership group and provide ongoing working capital.
Formed Fiber Technologies, Inc. is a leading manufacturer of highly engineered thermoformed components, nonwoven fabrics and polyester staple fabrics for automotive industry headquartered in Bingham Farms, MI.
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Keltic Financial Services is pleased to announce the appointment of Clifton Ray Hines to its sales team as vice president and Great Lakes regional manager. He will be focused on new business generation primarily in Ohio, Michigan and Western Pennsylvania. Hines joins Keltic with more than 20 years of commercial lending experience. He previously held positions with Presidential Financial Corporation, PNC Business Credit, First Merit Bank and Huntington National Bank, among others. He has held both senior vice president and vice president positions in asset-based finance, commercial real estate, commercial/industrial lending and turnaround finance. Hines also founded a commercial real estate consulting firm that encompassed corporate finance, restructuring and integration, mergers and acquisitions and commercial real estate finance.
On behalf of Keltic Financial, John P. Reilly, founder and CEO, said "We welcome the opportunity to add someone of Ray's caliber to our team. We expect him to have a long and successful tenure with Keltic." Hines is a member of the Commercial Finance Association (CFA), the Turnaround Management Association (TMA), the Association for Corporate Growth (ACG) and the Great Lakes Funding Network (GLFN). Renasant Business Credit, the ABL division of Renasant Bank based in Atlanta, has hired Bill Drmacich as SVP/senior relationship manager. In this role he will be responsible for originating, underwriting and managing asset based loan relationships in the southeastern U.S. Bill can be reached at bdrmacich@renasant.com and (770) 989-4508. Renasant Business Credit is focused on providing traditional asset based revolving lines of credit secured by AR and INV. Credit commitment amounts are typically up to $10mm and target clients are mainly manufacturers, wholesale/distributors and B2B service companies. |
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Grovepoint Capital LLP (Grovepoint), the private investment firm, is pleased to announce the launch of Grovepoint Credit.
Grovepoint Credit has been established as a secured lender to viable businesses undergoing corporate change, including restructuring and turnaround, as well as to other special situations. The business has been established to address a capital gap in the UK, which despite numerous initiatives, remains an impediment to the recovery of companies with growth potential.
Grovepoint Credit's founders have decades of experience. The business will be led by Dennis Levine, who has a 30-year track record in finance and was the founder of Burdale Financial Limited (Burdale), the specialist lending group which was sold to Wachovia and then Bank of Ireland before being acquired in 2012 by Wells Fargo. During Dennis' time at the helm, Burdale expanded into the US market and led the refinancing of over 100 companies. Dennis joins Grovepoint as a partner and his team at Grovepoint Credit will include former Burdale colleagues Nick Clark and Brian Gitlin.
Also joining the team is Peter Jaffe, who until recently headed the Restructuring Group for EMEA and Asia Pacific at JP Morgan in London. Peter has been involved in many complex restructurings across different industries and geographies. He will work closely with Dennis to establish, manage and grow the business.
Grovepoint Capital LLP was founded in 2010. The firm, which operates as a partnership, has an established principal investment arm, which has arranged, advised and structured investments with a total value of over $1 billion, and an investment management business which originates and manages specialised investment opportunities for sophisticated investors.
Commenting on the launch of Grovepoint Credit, Dennis Levine said,
"It was essential to find the right partner for building a substantial new business and in Grovepoint we have found the ideal home. Good companies that shouldn't go out of business are being allowed to fail because specialist funding expertise for complex situations has historically been in short supply. Grovepoint Credit intends to be at the forefront of a shift towards more non-bank sources of lending in the UK."
Horizon Technology Finance Corporation, a leading specialty finance company that provides secured loans to venture capital and private equity backed development-stage companies in the technology, life science, healthcare information and services, and clean-tech industries, announced that Horizon Funding Trust 2013-1, a newly formed wholly owned subsidiary of Horizon, has issued $90 million of Notes (the Notes) rated A2 (sf) by Moody's Investors Service, Inc. and backed by $189 million of secured loans originated by Horizon.
Guggenheim Securities, LLC acted as arranger of the Notes, and Horizon is the sponsor, originator and servicer for the transaction. The Notes bear interest at a fixed interest rate of 3.00% per annum and have a stated maturity date of May 15, 2018. The Notes have not been and will not be registered under the Securities Act of 1933, as amended, or any state "blue sky" laws and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
"We are pleased to complete Horizon's first securitization," said Christopher M. Mathieu, SVP and chief financial officer of Horizon.
"With this transaction, we have both reduced and fixed the interest rate on a large portion of Horizon's borrowings, enabling Horizon to lower future interest expense and reduce floating interest rate risk.
The securitization fixed the stated interest rate on 68% of our current borrowings at 3.00%."
Mathieu continued, "This securitization, combined with the recent reduction in the interest rate on our $75 million revolving credit facility with Wells Fargo, reflects management's focus on lowering borrowing costs in order to improve net investment income and overall returns to our shareholders. By expanding Horizon's capital resources and securing additional long-term financing under attractive terms, we have further enhanced our ability to leverage our investments and grow future earnings."
Milbank, Tweed, Hadley & McCloy LLP has represented affiliates of KKR Asset Management LLC (KAM) in the structuring and issuance of approximately $519 million of collateralized loan obligation (CLO) notes in a transaction in which Citigroup Global Markets Inc. acted as lead initial purchaser and placement agent, KKR Capital Markets LLC acted as an initial purchaser and placement agent, and Natixis Securities Americas LLC acted as a placement agent. The CLO notes are collateralized primarily by a diversified portfolio of senior secured corporate loan obligations selected by and to be managed for the CLO issuer by a KAM affiliate. KAM was formed in June 2004 as a subsidiary of Kohlberg Kravis Roberts & Co. L.P., a leading global investment firm with a 37-year history of leadership, innovation and investment excellence.
Partner Deborah Festa led the Milbank team, which also included partner James Warbey and associate John Goldfinch who advised on EU risk retention compliance matters, and associates Michael Nguyen, Jennifer Harris, and John McManmon. Festa comments, "We were thrilled to contribute to the success of this CLO, which like so many of KAM's transactions is innovative in its approach and structure."
Tiger Group's Remarketing Services Division: Bidding is now underway on a wide range of kitchen and support equipment, restaurant furniture and furnishings, and multimedia and D.J. systems from L.A. Reflections in an online sale being conducted by Tiger Group's Remarketing Services Division. The upscale, full-service restaurant and sushi bar voluntarily filed for Chapter 11 Bankruptcy Protection in March 2012 in the California Central Bankruptcy Court (case number 2:12-bk-20318)
Bidding at www.SoldTiger.com will close in rapid succession, live auction style, on July 2 at 10:30 a.m. (PT). A preview will be held at 155 S. Main Street, Los Angeles, on Monday, July 1, from 10 a.m. to 4 p.m. "The equipment of L.A. Reflections is like new, as the restaurant only operated for a period of approximately four months, before shutting its doors for good," said Jeff Tanenbaum, president of Tiger's Remarketing Services Division. Kitchen and support equipment being sold include a Marsal and Son's pizza oven, stoves, griddles, ranges and deep fryers, an American Range Double Broiler, as well as refrigeration units, sushi refrigeration displays, meat slicer, stainless steel prep tables, bakers' racks, cookware, dishware, cutlery, and more. Restaurant furniture and furnishings being auctioned include two- and four-person tables, ultra-modern chairs and benches, sushi bar tables, a surveillance system with eight cameras, artwork, desks, employee lockers, and more. Electronics on the block include 50-inch screens, 32-inch flat panel televisions, a Spaco Technologies P.A. amplifier, a projector, Blu-Ray and DVD players, a DFX Professional 4000-watt stereo amplifier, a Numark CD Player, a Gemini 4-channel mixer, an Odyssey 8-channel controller, Club Pro speakers, and more.
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 There have been some signs and indicators recently that the economy may finally be turning the corner. But many cash-strapped businesses will be unable to take advantage of a possible recovery because they are stuck in a kind of bank purgatory known as the "special assets group."Many banks make the mistake of lumping all problem loans that have been assigned to special assets into one big bucket and applying the same plan of action: reduce exposure to the point the bank can liquidate with little or minimal loss. The bank has one goal in mind: grind the debt obligation down, with little or no focus on whether or not there is a viable business model that just may be caught up in a bad set of circumstances.
Read on...
Author: Tracy Eden is the National Marketing Director for Commercial Finance Group (CFG), which has offices throughout the U.S. and Canada. CFG provides creative financing solutions to businesses that may not qualify for traditional financing. Visit www.cfgroup.net or contact Tracy at tdeden@cfgroup.net.
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Events Calendar
Upcoming CFA Professional Development Programs and Chapter Events. Please click here to view our entire calendar of events. Conferences/Workshops
October 8-11, 2013 Chicago, IL October 9-10, 2013 Chicago, IL November 13-15, 2013 L.A. Live, Los Angeles, CA
July 30, 2013
Palm Restaurant, Charlotte, NC
July 30, 2013
Geneva National Golf Club
Lake Geneva, WI
August 8, 2013
Ocean Place Resort & Spa
Long Branch, NJ
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TSL's June digital-only
issue is now available!
Click here to begin reading
the middle market issue.
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Email your press releases, company news, and deal announcements to:
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Click here to view TSL's Deal Table, the industry's official list of ABL & factoring deals compiled by the Commercial Finance Association.
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The views expressed in TSL Express' featured article are solely the views of the author and do not represent the views or position
of the Commercial Finance Association.
Commercial Finance Association ADVERTISING INFO.
370 Seventh Avenue, Ste. 1801 Interested in advertising in
(212) 792-9390
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