Alpha Media Holdings LLC – All Change as Debtors Seek Approval of Revamped $115mn DIP Financing from Brigade Capital Management and ICG, with Fortress Investment Group Snubbed Again

February 18, 2021 – The Debtors filed a motion requesting a final debtor-in-possession ("DIP") order that would approve replacement DIP financing comprised of (i) a $95.0mn DIP term loan to be provided by newcomer Brigade Capital Management, LP ("Brigade," perhaps onlending the $175.0mn it will pocket, subject to appeal, courtesy of Citigroup's infamous Revlon error) and used to repay the entirety of the Debtors' first lien prepetition indebtedness now held by Fortress Investment Group LLC ("Fortress," which had only just purchased that debt prior to the Debtors' Chapter 11 filings, reportedly at par) and (ii) a $20.0mn junior DIP facility to be provided by existing second lien noteholders fronted by ICG Debt Administration LLC (“ICG") as agent, with $5.0mn of that facility to be used to repay borrowings under the Debtors' earlier Court approved DIP arrangements with ICG as lender.

Often-snubbed Fortress again comes out empty handed, with its second effort at landing the DIP lender role falling short after an earlier proposal was viewed as inferior to the now replaced ICG financing. Simply put, the Debtors and current signatories to yet another restructuring support agreement (now including Brigade) simply do not care very much for Fortress and its perceived efforts to extract value from the Debtors' Chapter 11 predicament.

A hearing on the DIP financing is scheduled for February 23rd.

The Debtors' motion provides: "The DIP Facilities, which are supported by ICG and the Debtors’ unsecured noteholders, contemplate that Brigade will provide a $95 million senior postpetition loan to fully satisfy and retire the Debtors’ existing first lien indebtedness and provide incremental liquidity to the Debtors. In addition, the DIP Facilities contemplate the infusion of additional liquidity in the form of a $20 million junior debtor-in-possession financing facility provided by ICG that converts into a second lien delayed draw term loan upon the Debtors’ emergence from bankruptcy. Proceeds of the junior debtor-in-possession financing facility provided by ICG as part of the DIP Facilities will be used, in part, to fully satisfy and retire the $5 million supplied to the Debtors under the Interim DIP Facility pursuant to the Interim Order. The DIP Facilities are predicated upon the Debtors entering into a new restructuring support agreement with ICG and Brigade to support an amended plan of reorganization which would provide the Debtors’ existing second lien lenders with the equity in the reorganized company."

The motion continues: “Since entry of the Interim DIP Order, the Debtors’ advisors have worked tirelessly to ensure that the Debtors are able to obtain access to post-petition liquidity on the best terms available under the circumstances. To that end, during the last several weeks, the Debtors’ advisors have re-engaged their prepetition funded debt holders, including ICG and Fortress, in an effort to develop a post-petition financing proposal and restructuring alternative with committed exit financing and full support from stakeholders across the Debtors’ entire capital structure. These efforts have been successful. By this Amended Motion, the Debtors seek final approval to access up to $115 million of debtor-in-possession financing supplied by Brigade and ICG (and several other financial institutions) consisting of (i) a $95 million senior facility provided by Brigade which will be used to retire and satisfy the Debtors’ existing first lien indebtedness and provide incremental liquidity and (ii) a $20 million junior facility provided by ICG (and several other financial institutions) that converts into a second lien delayed draw note facility upon the Debtors’ emergence from bankruptcy. Proceeds of the junior facility will be used, in part, to fully satisfy and retire the $5 million supplied to the Debtors by ICG (and several other financial institutions) through the Interim DIP Facility. In connection with the approval of the DIP Facilities, the Debtors have agreed to enter into an Amended and Restated Restructuring Support Agreement with Brigade, ICG, and the Debtors’ other second lien lenders and unsecured noteholders to support an amended chapter 11 plan that, like the plan the Debtors filed on the first day of these cases, would reinstate general unsecured claims and provide the Debtors’ second lien noteholders with substantially all of the equity in the reorganized company.

As to the Fortress financing proposal, which the Debtors concede was comparable from a cost perspective, it is pretty clear that the Debtors and signatories to the Debtors' restructuring support agreement do not trust Fortress with any involvement in the Debtors' present and future capital structure; with the Debtors arguing that absent Fortress they get increased deal certainty, lower litigation risk and more flexibility as to refinancing going forward (with first lien debt retired), The Debtors' motion continues: "The DIP Facilities…provide the Debtors with … capital…on terms better under the circumstances than any other alternative source of postpetition financing, including the Fortress Proposal.

• First, the DIP Facilities are the most attractive source of postpetition financing among the Debtors’ current alternatives because they are predicated upon the only fully consensual path to the Debtors’ emergence from chapter 11. Specifically, because the DIP Facilities are supported by the Debtors’ second lien lenders and unsecured noteholders and contemplate retiring all of the Debtors’ existing first lien debt through the extension of postpetition financing, it is unlikely that any funded debt holder will object. This will eliminate litigation costs associated with a less than fully consensual deal and will avoid the potential cramup fight that might ensue if the Debtors’ existing first lien lenders were to remain part of the Debtors’ capital structure through the pendency of these chapter 11 cases. 
• Second, although the aggregate cost to the Debtors of the Fortress Proposal and the DIP Facilities is comparable, the DIP Facilities provide more liquidity to the Debtors upon their emergence from chapter 11 than does the Fortress Proposal. 
• Third, the DIP Facilities reduce the amount of the Debtors’ first lien debt which makes it easier for the Debtors to refinance their first lien indebtedness in the future. Similarly, because the terms of the deal underlying the DIP Facilities are such that the second lien debt holders are contemplated to be the Debtors’ new equity holders, the Debtors are likely to have greater flexibility to amend or refinance their junior debt after they emerge. 
• Finally, the principal economic terms proposed under the DIP Facilities were negotiated in good faith, at arm’s length, and are, in the aggregate, consistent with the cost of debtor-in-possession financings generally."

Key Term of the Amended DIP Financing:

• Borrower: Alpha Media LLC and Alpha 3E Corporation 
• Guarantor: Each Debtor other than the Issuers/Borrowers.
• Lenders: Various institutions party to the Junior DIP Note Purchase Agreement and to the Senior DIP Credit Agreement.
• Term: 
  1. Pursuant to the Junior DIP Note Purchase Agreement:
     • The date which is the earliest of: (a) the DIP Maturity Date; (b) the consummation of a sale of all or substantially all of the Credit Parties’ assets, (c) the effective date of the Plan of Reorganization or any other plan of reorganization in respect of the Debtors, and (d) the date the Obligations are accelerated pursuant to Section 7.2 of the Junior DIP Note Purchase Agreement.
  2. Pursuant to the Senior DIP Credit Agreement:
     • The date which is the earliest of: (a) the DIP Maturity Date, (b) the consummation of a sale of all or substantially all of the Credit Parties’ assets, (c) the effective date of the Plan of Reorganization or any other plan of reorganization in respect of the Debtors, and (d) the date the Obligations are accelerated pursuant to Section 7.2 of the Senior DIP Credit Agreement.
  3. For both agreements the DIP Maturity Date is October 24, 2021; provided that if the FCC has failed to approve (and has not disapproved or rejected) the change of ownership described in the FCC Interim Long Form Application by such date, and an officer of the Debtors certifies that the other conditions precedent to the Plan Effective Date in the Plan of Reorganization are capable of being satisfied promptly after the date such FCC approval is received, the DIP Maturity Date shall be automatically extended until thirty (30) days after the earlier of (i) the date the FCC approves such change of ownership or (ii) the date the FCC denies or rejects such change of ownership; provided further, that in no event shall the DIP Maturity Date be extended past April 24, 2022.
• Commitment: $20mn under the Junior DIP Note Purchase Agreement and $95mn under the Senior DIP Credit Agreement.
• Interest Rates:
  1. Under the Junior DIP Note Purchase Agreement:
     • The Junior DIP Notes shall bear interest from the date made at a rate per annum equal to Benchmark plus the Applicable Margin therefor. All computations of interest shall be made on the basis of a 360-day year and actual days elapsed.
       • “Applicable Margin” means 9.50% per annum.
  2. Under the Senior DIP Credit Agreement:
     • The Loans shall bear interest from the date made at a rate per annum equal to Benchmark plus the Applicable Margin. All computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed..
       • “Applicable Margin” means 8.00% per annum
  3. In both agreements, the Benchmark is the three month LIBOR Rate.
• Use of Proceeds:
  1. Under the Junior DIP Note Purchase Agreement, the use of cash collateral and the proceeds of the Junior DIP Notes made, and deemed made, hereunder shall be used by the Issuer as follows:
     • to repay in full all obligations under the Interim DIP Facility, and (ii) for the purposes, and subject to the limitations, set forth in Paragraph 10 of the Final Order; and
     • to fund the payment of all costs and expenses necessary to consummate the Plan of Reorganization.
  2. Under the Senior DIP Credit Agreement, the proceeds from the Loans shall be used to:
     • Repay in full the Prepetition First Lien Obligations;
     • Pay all fees, costs and expenses of the Administrative Agent and Lenders payable under the Senior DIP Credit Agreement; and
     • As otherwise provided in paragraph 10 of the Final Order.
• Fees: 
  1. There are no fees payable to the Junior DIP Secured Parties under the Junior DIP Note Purchase Agreement.
  2. The fees and payments payable to the Senior DIP Secured Parties under the Senior DIP Credit Agreement are as follows:
     • (a) Senior DIP Agent’s Fees. The Borrowers shall pay to the Senior DIP Agent, for the Senior DIP Agent’s own account, fees in the amounts and at the times set forth in a letter agreement among the Borrowers and the Senior DIP Agent, dated as of the Closing Date (as amended, modified or supplemented from time to time, the “Agency Fee Letter”).
     • (b) Closing Payment. The Borrowers shall pay to each Senior DIP Lender, a non-refundable closing payment equal to 2.00% of the aggregate principal amount of such Senior DIP Lender Lender’s Closing Date Loans (the “Closing Payment”), which Closing Payment shall be fully earned, due and payable on the Closing Date. The parties hereto agree that the Closing Payment is not a payment for property or services provided by any Senior DIP Lender and, to the maximum extent possible, the Closing Payment shall be netted against the amount of Senior DIP Loans funded by each Senior DIP Lender on the Closing Date.
     • (c) Exit Payment. On the date that is the earlier of (i) effective date of any chapter 11 plan confirmed in the Bankruptcy Cases, including the Plan of Reorganization, or (ii) the repayment in full of the Senior DIP Loans, the Borrowers shall pay to each Senior DIP Lender in cash, a non-refundable sum (the “Exit Payment”) equal to 5.00% of the aggregate principal amount of such Senior DIP Lender’s Closing Date Loans, which shall be fully earned on the Closing Date, provided that such Exit Payment shall be deemed waived and shall not be required to be paid if either (x) the closing occurs under the Exit First Lien Credit Facility (as defined in the Senior DIP Credit Agreement) and the Senior DIP Obligations required to be repaid on the Plan Effective Date become outstanding loans under the Exit First Lien Credit Facility pursuant to the terms of the Exit First Lien Credit Facility or are repaid from the proceeds of the Exit First Lien Credit Facility or (y) (1) each of the conditions to the occurrence of the closing under the Exit First Lien Credit Facility (other than those solely in the discretion of the Exit First Lien Agent or the Exit First Lien Lenders, as each such term is defined in the Senior DIP Credit Agreement) are satisfied (or waived in accordance with the terms thereof), (2) the Credit Parties are ready, willing and able to close with the Exit First Lien Lenders under the Exit First Lien Credit Facility, and (3) the Exit First Lien Lenders fail to close, or elect not to close, the Exit First Lien Credit Facility on the Plan Effective Date. The parties have agreed that the Exit Payment is not a payment for property or services provided by any Senior DIP Lender.
• Milestones: 
  1. Under the Junior DIP Note Purchase Agreement and Senior Secured DIP Credit Agreement, respectively, each Credit Party shall cause the following actions to be taken by the Debtors or the Bankruptcy Court, as applicable, by the following dates:
     • no later than ten (10) Business Days after the later of the date on which (i) the FCC approves the FCC Short Form Application or (ii) the Debtors determine in their discretion that they have received from the Supporting Second Lien Noteholders (and the Exit First Lien Lenders (as each such term is defined in the Restructuring Support Agreement) sufficient information required to file the FCC Interim Long Form Application, the Supporting Second Lien Noteholders and Exit First Lien Lenders, the Debtors shall file, as appropriate, FCC Forms 314 or 315 (collectively, the “FCC Interim Long Form Application”) seeking approval to issue new equity in a manner that complies with the foreign ownership limitations under Section 310(b)(4) of the Communications Act of 1934, as amended, and other applicable rules and regulations of the FCC, without any declaratory ruling, waiver or other form of special relief, other than that which permits the holding of the Reorganized Alpha Warrants (as defined in the Restructuring Support Agreement), under the Plan of Reorganization;
     • no later than three (3) Business Days after the Effective Date or Closing Date, respectively, the Debtors shall file the Plan of Reorganization and Disclosure Statement with the Bankruptcy Court;
     • no later than sixty (60) days after the Petition Date, the Bankruptcy Court shall have entered an order approving the Disclosure Statement and the solicitation materials with respect to the Plan of Reorganization;
     • no later than one hundred ten (110) days after the Petition Date, the Bankruptcy Court shall have entered the Confirmation Order; and
     • no later than ten (10) Business Days after the FCC approves the FCC Interim Long Form Application the Plan Effective Date shall occur.

Prepetition Indebtedness

Lead Debtor Alpha Holdings is the direct or indirect parent of each of the other Debtors, all of which are entities organized under the laws of the State of Delaware. As of the Petition Date and as summarized in the table below, the Debtors’ capital structure consists of outstanding funded-debt obligations in the aggregate principal and interest amount of approximately $267.0mn.

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