White Star Petroleum Holdings – Seeks $28.5mn in DIP Financing From First Lien Prepetition Lenders, $15.0mn on Interim Basis, and Use of Cash Collateral

May 28, 2019 – The Debtors requested Court authority to (i) access $28.5mn in debtor-in-possession (“DIP”) financing ($15.0mn on an interim basis) to be provided by certain of the Debtors' prepetition first lien lenders^FN1 (those same lenders having precipitated the Debtors' Chapter 11 filings by declaring an event of default and and sweeping up $8.1mn in cash on hand) and (ii) use cash collateral [Docket No. 16].

The DIP motion states, “The Debtors’ need to obtain credit pursuant to postpetition financing is immediate and critical in order to enable the Debtors to continue operations and to administer and preserve the value of their estates until a sale of substantially all of the Debtors’ assets is
completed. The Debtors are operating with extremely limited access to liquidity following the events of May 1, 2019, whereby the Debtors learned that the RBL Agent had declared an event of default and swept $8.1 million of cash from the Debtors’ accounts. Pursuant to negotiations with the RBL Agent and its advisors, the RBL Lenders agreed to provide the Debtors with access to some of the swept cash to fund outstanding checks and ACH revenue payments, as well as other expenditures specifically approved by the RBL Agent. The Debtors have been operating with the RBL Agent authorizing specific expenditures since the April 30 sweep.

The Debtors do not have sufficient available sources of working capital and financing to operate their businesses or to maintain their properties in the ordinary course of business—let alone to pursue the various options available to create value for stakeholders— without debtor-in-possession financing and the authorized use of  ‘cash collateral’ within the meaning of section 363(a) of the Bankruptcy Code (‘Cash Collateral’).”

Key Terms of DIP Facility

• Amount and Facility: A Senior secured priming DIP financing (the “DIP Facility”) consisting of the Term Loan Commitments, the aggregate amount of which is $26,884,640, and the L/C Commitments, the aggregate amount of which is $1,615,360, with a total maximum principal availability of $28,500,000 (the “Total Aggregate Commitment” and the loans and letters of credit issued thereunder, the “Loans”) to be funded in multiple borrowings as follows: (a) up to $15,000,000 million made available not later than one business day following the entry of the Interim Order (the “Initial Borrowing”), and (b) the remainder of the Total Aggregate Commitment, other than the L/C Commitments (the “Subsequent Borrowing”), made available in a single draw following the entry of the Final Order.
• Borrower: White Star Petroleum, LLC
• Guarantors: White Star Petroleum Holdings, LLC and each subsidiary of the Borrower that becomes a party to the Guarantee.
• DIP Agent: MUFG Union Bank, N.A.
• DIP lenders: The lenders from time to time party to the DIP Credit Agreement.
• Interest Rate: Loans under the DIP Facility will bear interest at a rate, at Borrower’s option, equal to the Base Rate plus 9.00% per annum or the Eurodollar Rate plus 10.00% per annum. DIP Credit Agreement § 2.08 (Interest).
• Default Interest: If any Event of Default is in existence, the principal amount of all Loans outstanding and, to the extent permitted by applicable Requirements of Law, any interest, fees or other amounts owed under the DIP Credit Agreement will bear interest at a rate per annum (the “Default Rate”) equal to the rate per annum, (i) in the case of outstanding principal, the rate that would otherwise be applicable thereto plus two percent (2.00%), and (ii) in the case of any other amount, the rate otherwise payable at such time on Base Rate Loans plus two percent (2.00%), but in no event to exceed an amount not permitted by the applicable Requirements of Law. Interest that accrues at the Default Rate will be payable on demand and shall otherwise be payable in arrears on each Interest Payment Date.
• Use of Proceeds: For (i) the payment of the allowed administrative costs and expenses of the Chapter 11 Cases, (ii) the payment of certain payments pursuant to any First Day Orders (as defined in the DIP Credit Agreement), (iii) the payment of adequate protection payments as set forth in the Financing Orders (as defined in the DIP Credit Agreement), (iv) current interest and fees due to the DIP Agent and the Lenders pursuant to the terms of the DIP Credit Agreement, and (v) working capital purposes, in each case, solely in a manner consistent with the Approved Budget (as defined below) (as in effect from time to time and subject to the Permitted Variance (as defined in the DIP Credit Agreement)) and the Financing Orders. The Borrower will use Letters of Credit for general corporate purposes.
• Maturity: The DIP Facility will mature on the earliest of (such earliest date, the “Maturity Date”):
  • December 31, 2019 (the “Scheduled Maturity Date”); provided that the Scheduled Maturity Date may be extended one time by up to three months upon request by the DIP Borrower received by the DIP Agent no later than 10 business days prior to December 31, 2019 and with the prior written consent of the DIP Agent; provided, that as of December 31, 2019, no default or Event of Default under the DIP Facility shall have occurred and be continuing;
  • the effective date of a plan of reorganization or liquidation in the Chapter 11 Cases;
  • (c) the consummation of a sale of all or substantially all of the assets of the Debtors pursuant to section 363 of the Bankruptcy Code or otherwise, other than in connection with a confirmed plan of reorganization or liquidation in the Chapter 11 Cases or as otherwise approved by the DIP Agent in its reasonable discretion; 
  • (d) without the DIP Agent’s prior written consent, the date of filing or express written support by any Debtor of a plan of liquidation or reorganization and related disclosure statement that is not an Acceptable Plan (as defined below). As used herein, an “Acceptable Plan” means a plan of reorganization or liquidation and related disclosure statement for each of the Chapter 11 Cases filed by the Debtors, in form and substance reasonably satisfactory to the DIP Agent, as confirmed in writing by the DIP Agent, that (i) contemplates a sale, to be indefeasibly paid for in cash, of all or substantially all of the assets of the Debtors, (ii) provides for the consideration for such sale to be indefeasibly paid in cash on the effective date of such sale, and (iii) provides for the application of the proceeds of such sale in a manner permitted by the Bankruptcy Code; or 
  • (e) the date of termination of the DIP Lenders’ commitments and the acceleration of any outstanding Loans, in each case, under the DIP Facility in accordance with the terms of the credit agreement (the “DIP Credit Agreement”) and the other definitive documentation with respect to the DIP Facility (collectively with the DIP Credit Agreement and the related security documents, the “Operative Documents”).
• Fees: The DIP Agent will receive, for the ratable benefit of each Lender, an unused commitment fee in the amount of 1.00% per annum of the unfunded portion of the aggregate commitments, which shall be paid in full in cash on a monthly basis. The DIP Agent will receive an administrative agency fee in an amount equal to $35,000. The DIP Agent will receive a commitment premium in an amount equal to 2.00% of the aggregate amount of the commitments, for the ratable benefit of each commitment party. The DIP Agent will receive a closing premium equal to 3.00% of the commitments of each Lender on the Closing Date, for the ratable benefit of each Lender.

Pre-Petition Capital Structure

As of the Petition Date, the Debtors had approximately $346.8 million in total funded debt, excluding accrued interest. The following table summarizes the Debtors’ prepetition indebtedness:

FN1: The Debtors are party to a revolving credit agreement, dated as of June 30, 2016, (the “RBL Credit Agreement”), which provides for a first lien revolving credit facility, among Debtor White Star Petroleum LLC ("WSTR") as borrower, the several lenders from time to time parties thereto (the “RBL Lenders”) and MUFG Union Bank, N.A., as administrative agent and collateral agent for the RBL Lenders (the “RBL Agent”). Each of the other debtors serves as a guarantor. The RBL Credit Agreement’s stated maturity is June 30, 2020 and as at the Petition Date, the Debtors have drawn substantially all of the availability under the RBL Credit Agreement (approximately $274 million).

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