February 26, 2019 – The Debtors filed an amended motion seeking authority (i) to access $1bn in debtor-in-possession ("DIP") financing, with $400mn of that financing to be available on an interim basis, and (ii) to use cash collateral [Docket No. 42, NB: The amended motion reflects certain changes to conform the text of the amended motion to that of the proposed form of DIP order and the original DIP motion formerly at Docket No. 31 has been removed].
At a hearing also held on February 26, 2019, the Court took on board the plea of Debtors' counsel that, "We’re here because we need a DIP and we need it fast" and gave a green light to the interim financing.
One thing we will be keeping a close eye on is the Debtors' use of DIP financing to partcipate in FCC spectrum auctions. In a first day motion requesting the authority to participate in these auctions [Docket Nos. 10 and 41], the Debtors make abundantly clear how important its ability to purchase spectrum is to its business. The DIP term sheet states that "working capital" is an approved use of DIP proceeds but does not specifically reference purchases of spectrum. The Debtors' 13-week budget also makes no specific reference in its projected operating disbursements over the period.
The DIP financing will be made available pursuant to a senior secured, superpriority DIP credit facility in an aggregate principal amount of up to $1bn and will be comprised of (a) a revolving credit facility (the “DIP Revolving Facility”) with aggregate commitments of up to $500mn, including a letter of credit sub-facility in an aggregate amount of up to $50mn (the “DIP L/C Sub-Facility”), and (b) a term loan facility (the “DIP Term Loan Facility” and, together with the DIP Revolving Facility, the “DIP Facilities”) in an aggregate principal amount of $500mn. The interim DIP financing is to include $100mn under the DIP Revolving Facility and $300mn under the DIP Term Loan Facility.
The DIP motion states, “In a true testament to the strength of Windstream’s business operations and reorganizational prospects, Windstream has been able secure $1,000,000,000 in debtor-in-possession financing on market terms over the course of a mere business week….The Debtors received multiple proposals from lenders within and outside the capital structure for both out-of-court and in-court financing. Together with their advisors, the Debtors and their advisors moved as quickly as possible to provide the necessary due diligence and undertake the negotiations necessary to secure the DIP Financing proposal that is now before the Court. This process was ultimately successful, culminating in the proposed $500 million DIP Revolving Facility and $500 million DIP Term Loan Facility. The DIP Facilities allow the DIP Loan Parties to immediately access up to $100 million under the DIP Revolving Facility and $300 million under the DIP Term Loan Facility upon entry of the Interim DIP Order so they can continue to pay their operating expenses and signal to their customers, vendors, employees, and lenders that operations will continue in the ordinary course. The DIP Facilities will provide sufficient liquidity to ensure the Debtors are able to pay their debts as they come due, notwithstanding their inability to access the revolving credit facility under their Prepetition Revolving Credit Facility.
Access to the DIP Facilities, including the use of Cash Collateral, will provide the Debtors with sufficient funds to preserve and maximize the value of their estates, responsibly administer these chapter 11 cases, and implement their business plan.
The Debtors have an immediate postpetition need to use Cash Collateral and to borrow up to $400 million under the DIP Documents on an interim basis.”
Key Terms of the DIP Facilities:
- Borrower: Windstream Service, LLC
- Guarantors: Holdings and each existing and future direct and indirect domestic subsidiary of the Borrower to the extent required by Section 5.10 of the Existing Credit Facility.
- DIP Financing Lenders: With respect to the Term Facility, the Arranger and the other institutions, and other financial institutions or entities acceptable to Citi and the Borrower (collectively, the “Term Lenders”)
- Arranger: Citigroup Global Markets Inc. (“CGMI”) on behalf of Citi and each Additional Arranger (collectively, together with their affiliates, the “Arranger”).
- DIP Facilities: Term Facility – A superpriority term loan facility (the “Term Facility”) in an aggregate principal amount of up to $500,000,000 (the “Term Loan Commitments”). Amounts paid or prepaid under the Term Facility may not be reborrowed.
- Term Facility Initial Availability: A portion of the Term Loan Commitments shall be available to the Borrower in an amount equal to the lesser of $300,000,000 and such other amount as may be approved by order of the Bankruptcy Court.
- Revolving Facility – A superpriority non-amortizing revolving credit facility (the “Revolving Facility” and, together with the Term Facility, the “Facilities”) in an aggregate principal amount of up to $500,000,000 (the “Revolving Commitments” and, together with the Term Loan Commitments, the “Commitments”).
- Revolving Facility Initial Availability: Interim availability under the Revolving Facility will be to $100,000,000.
- Maturity: The maturity date of the Facilities will be (and all loans and obligations under the Facilities shall be repaid in full in cash on) the stated maturity, which shall be the date that is 24 months after the Closing Date (the “Maturity Date”).
- Interest Rates: (i) the Applicable Margin (as defined in the Fee Letter) plus the Alternate Base Rate which shall be defined as the highest of (i) Citibank’s base rate, (ii) the three-month certificate of deposit rate plus 1/2 of 1%, (iii) the Federal Funds Effective Rate plus 1/2 of 1% and (iv) the one-month LIBO Rate plus 1.00% per annum, in each case, calculated on a 365/366-day basis and payable monthly in arrears; or (ii) the Applicable Margin plus the current LIBO rate as quoted by Reuters Screen LIBOR01 Page, adjusted for reserve requirements, if any, and subject to customary change of circumstance provisions, for interest periods of one month (the “LIBO Rate”), calculated on a 360-day basis and payable at the end of the relevant interest period, but in any event at least quarterly; provided that the LIBO Rate will at no time be less than 0% per annum.
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