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Neiman Marcus Group LTD LLC – Seeks $675mn of DIP Financing with First $275mn Tranche Available Imminently, Defends Choice of Present Financing Over “Not Actionable” Proposal from Mudrick Capital

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May 7, 2020 – The Debtors filed an emergency motion to access $675.0mn of debtor-in-possession (“DIP”) financing and use cash collateral [Docket No. 104].

The expensive DIP financing (see detail as to interest rates and fees totaling more than 20% below), backstopped by parties to the Debtors' restructuring support agreement and with Cortland Capital Markets Services LLC acting as administrative agent, will be made available in three tranches: (1) $275.0mn upon issuance of an interim DIP order (that to happen within 3 days of the Petition date), (ii) $250.mn on the issuance of a final DIP order and (iii) $150.0mn 120 days after the Petition date. The DIP financing does not include a roll-up and does not "prime any creditors without their consent." 

On the subject of the alternative DIP financing much discussed in recent weeks, with a group led by Mudrick Capital Management LP and hedge fund Third Point LLC reportedly offering $700.0mn of DIP financing on the condition that the Debtors embark on an immediate sale process; the motion states that it: "lacked the support of a majority lenders under the Term Loan Facility, was not fully committed, and therefore did not provide the same certainty and stability as the Term Loan Lender Group’s proposal…was not actionable because, among other things, the proposal required a protracted, costly, and difficult priming fight at the outset of these chapter 11 cases with little chance at success."

The DIP motion states, “Several weeks of negotiations culminated in a comprehensive, pre-negotiated restructuring transaction embodied in the Restructuring Support Agreement with, among other parties, an ad hoc group of lenders who collectively hold approximately 78 percent of the Debtors’ term loan debt and 78 percent of the Debtors’ debentures (the ‘Term Loan Lender Group’) and an ad hoc group of holders of approximately 99 percent of the Debtors’ Second Lien Notes and approximately 70 percent of Debtors’ Third Lien Notes (the ‘Noteholder Group’). The Restructuring Support Agreement provides commitments from the Term Loan Lender Group (excluding the holders of the 2028 Debentures) and the Noteholder Group to backstop the proposed $675 million new-money debtor in possession financing facility (the ‘DIP Facility’), provide a $750 million exit financing facility (the ‘Exit Facility’), and support implementation of a chapter 11 plan that substantially deleverages the Debtors’ balance sheet and allows the Debtors to emerge from these chapter 11 cases as a stronger, better-capitalized enterprise positioned for sustained success. Importantly, the DIP Lenders have agreed to provide the Prepetition Term Loan Lenders, the holders of the Second Lien Notes, the holders of the 2028 Debentures, and the holders of the Third Lien Notes with an opportunity to participate in the DIP Facility and Exit Facility if they sign the Restructuring Support Agreement.

If approved, the Debtors will use the proceeds of the DIP Facility to, among other things, honor employee wages and benefits, procure goods and services, fund general and corporate operating needs and the administration of these chapter 11 cases, provide adequate protection to the Debtors’ prepetition lenders, and consummate their plan of reorganization, all in accordance with the initial DIP budget…The terms of the DIP Facility are appropriate and reasonable under the circumstances, were the product of good faith, arm’s-length negotiations, and will benefit all stakeholders in these chapter 11 cases. Moreover, in contrast to many retail cases and other cases with asset-based lending facilities, the Debtors are not seeking to ‘roll-up’ the prepetition loan facilities under the DIP Facility, nor do the Debtors seek to prime any creditors without their consent. In addition, the Debtors do not seek to place any liens on inventory subject to a proper consignment.

Further, no other third party came forward with an actionable post-petition financing proposal. The Debtors received an initial draft of a term sheet from another group of Term Loan Facility lenders, but this term sheet lacked the support of a majority lenders under the Term Loan Facility, was not fully committed, and therefore did not provide the same certainty and stability as the Term Loan Lender Group’s proposal. Nonetheless, the Debtors engaged in good-faith discussions with the potential alternative lender but were unable to make significant progress in such discussions. Ultimately, the Debtors determined that the alternative financing proposal was not actionable because, among other things, the proposal required a protracted, costly, and difficult priming fight at the outset of these chapter 11 cases with little chance at success when the Debtors should be focused on stabilizing their operations and building further consensus around the value-maximizing transaction presented as of the Petition Date, of which the proposed DIP is a key component. Thus, the Debtors believe that the DIP Facility is the only acceptable post-petition financing proposal.”

Key Terms of the DIP Facility

  • Borrowers: Neiman Marcus Group Ltd LLC, as Lead Borrower, and the Neiman Marcus Group LLC and the NMG Subsidiary LLC, as Borrowers.
  • Guarantors: Mariposa Intermediate Holdings LLC, and each Subsidiary (other than any Excluded Subsidiary) and certain direct or indirect parent of the Lead Borrower (collectively with the Borrowers, the “Loan Parties”).
  • DIP Lenders: Those DIP Lenders listed on Schedule 2.01 attached to the DIP Credit Agreement.
  • DIP Agent: Cortland Products Corp.
  • DIP Commitments: An aggregate principal amount of $675mn, of which (a) $275mn shall be available to the Borrowers upon entry of the Interim Order; (b) $250mn shall be available to the Borrowers upon entry of the Final Order; and (c) $150mn shall be available to the Borrowers after the 120th day after the Petition Date.
  • Maturity: The maturity date means, the date that is the earliest of:
  1. October 7, 2020, or, if such date has been extended pursuant to section 2.18 of the DIP Credit Agreement, December 7, 2020;
  2. the date of the substantial consummation (as defined in Section 1101(2) of the Bankruptcy Code) of an Acceptable Plan;
  3. the date the Bankruptcy Court converts any of the Chapter 11 Cases to a Chapter 7 case;
  4. the date the Bankruptcy Court dismisses any of the Chapter 11 Cases;
  5. the date on which the Loan Parties consummate a sale of all or substantially all of the assets of the Loan Parties pursuant to section 363 of the Bankruptcy Code or otherwise; or
  6. such earlier date on which the Term Loans shall become due and payable by acceleration or otherwise in accordance with the terms of the DIP Credit Agreement and the other Loan Documents.
  • Interest Rates: (i)The Term Loans comprising each ABR Borrowing will bear interest at the ABR plus the Applicable Margin (11.75%) and (ii) The Term Loans comprising each Eurocurrency Borrowing will bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin (12.75%).
  • Default Rate: An additional 2%
  • Fees:
    • Total Upfront Fee: 4% of Total Commitments
    • Total Exit Fee: 3% of Total Commitments
    • Extension Fee: 2% of Total Commitments
    • Ticking Fee: daily basis at a rate per annum equal to 6.375% on the daily unused Commitment
  • Roll-Up: None
  • Milestones:
    • Interim DIP Order: Petition Date (“PD”) plus 3 business days 
    • Filing of Acceptable Plan: PD plus 30 days
    • Final DIP Financing Order: PD plus 40 days 
    • Approval of Disclosure Statement: PD plus 75 days
    • Plan Confirmation Order: PD plus 120 days
    • Effectiveness Date: PD plus 120 days

Prepetition Capital Structure

As of the Petition date, the Debtors’ had outstanding funded-debt obligations in the aggregate principal amount of approximately $5.1bn, including:

  1. a $900.0mn senior secured asset-based revolving credit facility (the “Asset-Based Revolving Credit Facility”), of which $749.0mn has been drawn; 
  2. a $100.0mn last-out term loan facility (the “FILO Facility”); 
  3. a $2,253.1mn senior secured term loan facility (the “Term Loan Facility”), which is comprised of $12.6mn outstanding of stub term loans with the original maturity date of October 25, 2020, $1,193.8mn outstanding of term loans with an extended maturity date of October 25, 2023, which pay interest entirely in cash, and $1,046.7mn outstanding of term loans with an extended maturity date of October 25, 2023, which pay interest partially in cash and partially in kind; 
  4. $561.7mn aggregate principal amount of 14.000% Second Lien Notes due 2024 (the “Second Lien Notes”); 
  5. $730.5mn aggregate principal amount of 8.000% Senior Secured Third Lien Notes due 2024 (the “8.000% Third Lien Notes”); 
  6. $497.8mn aggregate principal amount of 8.750% Senior Secured Third Lien Notes due 2024 (the “8.750% Third Lien Notes” and, together with the 8.000% Third Lien Notes, the “Third Lien Notes”); 
  7. $80.7mn aggregate principal amount of 8.000% Senior Cash Pay Notes due 2021 (the “Unsecured Cash Pay Notes”); 
  8. $56.6mn aggregate principal amount of 8.750%/9.500% Senior PIK Toggle Notes due 2021 (the “Unsecured PIK Toggle Notes” and, together with the Unsecured Cash Pay Notes, the “Unsecured Notes”); and 
  9. $125.0mn aggregate principal amount of 7.125% Senior Debentures due 2028.

Funded Debt

Maturity Date

Interest Rate

Principal Amount Outstanding (in thousands)

Asset-Based Revolving Credit Facility

July 25, 2021

variable

$749,000

FILO Facility

July 25, 2021

variable

$100,000

Cash Pay Extended Term Loans

October 25, 2023

variable

$1,193,815

Cash Pay/PIK Extended Term Loans

October 25, 2023

variable

$1,046,687

2013 Term Loans

October 25, 2020

variable

$12,597

14.0% Second Lien Notes

April 25, 2024

8.0% cash / 6.0% PIK

$561,733

8.000% Third Lien Notes

October 25, 2024

8.000%

$730,534

8.750% Third Lien Notes

October 25, 2024

8.750%

$497,849

8.000% Cash Pay Notes

October 15, 2021

8.000%

$80,680

8.750%/9.500% Senior PIK Toggle Notes

October 15, 2021

8.750%

$56,584

7.125% Senior Debentures

June 1, 2028

7.125%

$125,000

Total

 

 

$5,154,479

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The post Neiman Marcus Group LTD LLC – Seeks $675mn of DIP Financing with First $275mn Tranche Available Imminently, Defends Choice of Present Financing Over “Not Actionable” Proposal from Mudrick Capital appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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