This is the second time in bankruptcy in just over a year for these Debtors. In November 2017, while still Walter Investment Management Corp (WIMC”), the Debtors filed a prepackaged Chapter 11, emerging on February 9, 2018 having eliminated $800mn of debt. At the time, the emerging Debtors stated, “Ditech Holding is beginning its next chapter with increased financial flexibility and continued momentum in our efforts to transform our business. We are excited about the prospects of our core business and are confident that we are well positioned to drive profitable growth and create value for our shareholders.”
Thomas F. Marano, President and Chief Executive Officer of Ditech, said, “Since we completed a recapitalization last February, we have made important progress on our strategic initiatives and our expense management efforts. However, as a result of market challenges that have continued to accelerate and pressure our business, we must take further action. We intend to use this process to restructure our balance sheet and help us meet our obligations. We will continue to evaluate a broad range of options with the goals of maximizing value and creating the best path forward for our business. We are pleased to have the support of our lenders in this process.”
Restructuring Support Agreement
In an 8-K filed with the SEC, Ditech provides further detail as to this flexible approach to strategic alternatives, “The RSA also provides for the continuation of the Company’s prepetition review of strategic alternatives (the ‘Marketing Process’), whereby, as a potential alternative to the implementation of a Reorganization Transaction, any and all bids for the Company or its assets will be evaluated as a precursor to confirmation of any chapter 11 plan of reorganization. The Marketing Process will provide a public and comprehensive forum in which the Debtors will seek bids or proposals for three types of potential transactions, as described below. If a bid or proposal is received representing higher or better value than the Reorganization Transaction, it will either be incorporated into the Reorganization Transaction or pursued as an alternative to the Reorganization Transaction in consultation with the Consenting Term Lenders and subject to the RSA….The three types of transactions for which bids will be solicited are: (i) a ‘Sale Transaction’ meaning, a sale of substantially all of the Company’s assets, as provided in the RSA; (ii) an ‘Asset Sale Transaction’ meaning, the sale of a portion of the Company’s assets other than a Sale Transaction consummated prior to Effective Date; provided such sale shall only be conducted with the consent of the Requisite Term Lenders; and (iii) a ‘Master Servicing Transaction’ meaning, as part of a Reorganization Transaction to the extent the terms thereof are acceptable to the Requisite Term Lenders, entry by the Company into an agreement or agreements with an approved subservicer or subservicers (the “New Subservicer”) whereby, following the Effective Date, all or substantially all of the Company’s mortgage servicing rights are subserviced by the New Subservicer.
- DIP Warehouse Facility Claims. On the Effective Date, the holders of DIP Warehouse Facility Claims will be paid in full in cash;
- Term Loan Claims. On the Effective Date, the holders of Term Loan Claims will receive their pro rata share of new term loans under an amended and restated credit facility agreement in the aggregate principal amount of $400 million, and 100% of the Company’s new common stock, which will be privately held;
- Second Lien Notes Claims. On the Effective Date, the holders of the Company’s 9.00% Second Lien Senior Subordinated PIK Toggle Notes due 2024 (“Senior Notes”) will not receive any distribution;
- Go-Forward Trade Claims. On the Effective Date, holders of all Go-Forward Trade Claims (i.e., trade creditors identified by the Company (with the consent of the Requisite Term Lenders (as defined in the RSA)) as being integral to and necessary for the ongoing operations of New Ditech) will receive a distribution in cash in an amount equaling a certain percentage of their claim, subject to an aggregate cap; and
- Existing Equity Interests. On the Effective Date, holders of the Company’s existing equity will have their claims extinguished.”
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