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Kalera, Inc. – Vertical Farming Specialist Gets Authority for a Further $1mn in New Money DIP Financing from Prepetition Lender (and Presumed Loan-to-Own Stalking Horse) Sandton Capital Solutions

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April 27, 2023 – The Court hearing the Kalera case issued a second interim debtor-in-possession (“DIP”) financing order authorizing the Debtor to: (i) access a further $1.0mn in new money, DIP financing being provided prepetition lender (and distressed lending specialist) Sandton Credit Solutions Master Fund V, L.P. (“Sandton”) and (ii) continue using cash collateral [Docket No. 99, with updated Budget attached at Exhibit 1 and below]. As noted below, Sandton, which purchased its debt in March 2023* after involvement in the Debtor's out-of-court sales efforts, is also the Debtor's designated stalking horse in a section 363 auction/sale process.

Access to the $2.97mn balance, of what is in total $5.1mn of requested new money DIP financing, and authority to roll-up a $1.0mn prepetition bridge loan (provided by Sandton) is to be considered at a May 10th final DIP hearing.

With an April 6th interim DIP order, the Court hearing the Kalera case had previously allowed the Debtor to access a first $1.13mn tranche of the new money DIP [Docket No. 33].

*A declaration in support of first day filings [Docket No. 5] provides as to Sandton: 'As a result of the marketing process, Sandton Capital, a special situation fund with a focus on agriculture, acquired Farm Credit’s rights under the Farm Credit Facility. Since acquiring rights under the Farm Credit Facility, Sandton Capital has worked closely with the Debtor in its efforts to restructure and preserve value and has agreed to provide DIP financing to the Debtor which will provide the necessary funding to run a process to sell the Debtor’s assets as a going concern in Chapter 11. Other than the Sandton Capital interest noted above, no indications of interest were received for a sale of the Debtor’s business or additional financing."

Case Status

On April 4, 2023, Kalera, Inc. (“Kalera” or the “Debtor”) filed for Chapter 11 protection noting estimated assets between $1.0mn and $10.0mn; and estimated liabilities between $10.0mn and $50.0mn. At filing, the Debtor’s parent Kalera Public Limited Company (Nasdaq: KAL), a vertical farming company headquartered in Orlando, Florida, noted that the Debtor “intends to use the court-supervised process to evaluate strategic alternatives for Kalera, including a potential sale of Kalera or its assets.”

On April 27th, the Court hearing the Kalera cases issued a bidding procedures order authorizing the Debtor to enter into stalking horse arrangements with Sandton ($12.55mn credit bid). 

The DIP Motion

The motion [Docket No. 13 as amended by Docket No. 22] states, “The Debtors are in the midst of an extreme liquidity crisis. As of the Petition Date, the Debtor had $51,743.13 in unrestricted cash on hand in the Bank Accounts. Aside from the proposed DIP Facility, the Debtor does not have access to funds for operational expenses through existing credit facilities as such facilities are either fully drawn or the Debtor is unable to satisfy certain prerequisites to obtain additional extensions. Unless the DIP Facility is approved on an interim basis, the Debtor will be unable to meet certain immediate obligations, including, without limitation, the payment of payroll on April 14, 2023.

The DIP Facility will provide the Debtors with a $1.13 million draw upon entry of the Interim Order, with a committed financing facility up to $5.1 million proposed by the Debtor to be considered at a subsequent hearing, subject to the terms and conditions described herein, and set forth in the Interim Order.

On or about March 20, 2023, the Sandton and the Debtor entered into an amendment to the Prepetition Facility to increase the Revolving Credit Facility from $10 million to $11 million—providing an additional $1 million in available funding to the Debtor. The amendment and additional $1 million under the Revolving Credit Facility may referred to as the "Bridge Loan". The Bridge Loan is secured by a lien on the assets of the Debtor to the same extent as the Revolving Credit Facility. As of the Petition Date, the Debtor is informed and believes that the Debtor has drawn approximately $500,000 under the Bridge Loan."

Marketing Efforts

The motion continues: "The Debtor, through its CRO or qualified employees, contacted more than ten (10) lenders and financial institutions, including the Prepetition Lender, regarding extensions of existing credit arrangements and the provision of distress or debtor in possession financing. The Debtor requested and the Prepetition Lender would not agree to permit a senior lien ahead of the priority of the Prepetition Obligations. Based on the existence of the Prepetition Obligations, the Debtor only received interest from Prepetition Lender. The Debtor negotiated extensively regarding the terms of proposed DIP Facility. Ultimately, the Debtor selected the DIP Facility based on the conclusion that it provided the most favorable terms available to the Debtor and allowed the Debtor to preserve the value of its business."

Key Terms of DIP Facility

  • Borrower: Kalera Inc.
  • DIP Lender: Sandton Capital Solutions Master Fund V, L.P.
  • DIP Facility: The DIP Facility shall consist of a new money term loan facility in the aggregate principal amount of $5.1mn, with $1.13mn available on an interim based pursuant to the terms of the Interim Order.
  • New Money: $5.1mn ($1.13mn on an interim basis, which was raised to $2.13mn with second interim DIP order)
  • Roll-Up: $1.0mn (with final DIP order)
  • Interest Rate: 9% per annum
  • Default Rate: 2% per annum above applicable rate
  • Fess:
    • Termination Fee: Two percent (2%) shall be earned by and payable to the DIP Lender upon the sale of substantially all of the Debtor’s assets or confirmation of a chapter 11 plan to which the DIP Lender objects.
  • Use of Proceeds: Proceeds of the DIP Facility may be used for payment of: 
    • interest, fees and expenses to the DIP Agent in accordance with the DIP Facility,
    • post-petition operating expenses and other working capital and financing requirements of the Debtor, including provision of adequate protection and prepetition expenses whose payment is approved by the Court and is consistent with the Budget; 
    • post-petition and approved pre-petition employee wages, benefits and related obligations; 
    • certain transaction and bankruptcy related fees, costs and expenses, (including the attorneys’ fees and disbursements of counsel to the Debtors and Guarantors, and the professional fees and disbursements of other professional advisors of the Debtors and Guarantors), 
    • Prepetition claims of critical vendors, only as approved by the Court; and f. the fees, costs and expenses incurred by the DIP Agent and its professionals.
  • Milestones: 
    • The Bankruptcy Court shall have entered the Interim Order, no later than five (5) business days after the Petition Date;
    • The Borrowers shall have filed a motion seeking bid procedures for the sale of its assets and operations under an asset purchase agreement with the Senior Secured Lender as the stalking horse bidder with customary stalking horse protections (the “Acquired Assets”), no later than 10 business days after the Petition Date;
    • The Bankruptcy Court shall have entered the Final Order, No later than twenty-five (25) calendar days after the Petition Date. 
    • The deadline for the submission of binding bids shall be no later than sixty (60) calendar days after the Petition Date;
    • the Borrower shall commence an auction for the Acquired Assets in accordance with the bid procedures, no later than sixty-five (65) calendar days after the Petition Date;
    • The Bankruptcy Court shall have entered an order (which shall be in form and substance acceptable to Lender and the Prepetition Lender) approving the winning bid resulting from the auction of the Acquired Assets or, if no auction is held, approving a sale pursuant to the stalking horse bid(s), no later than seventy (70) calendar days after the Petition Date;
    • The Debtor shall consummate a sale transaction for the Acquired Assets, no later than seventy-five (75) calendar days after the Petition Date.

On milestones, the amended DIP motion [Docket No. 22] provides: "The Interim Order provides that the Debtor shall have filed a motion seeking approval of bid procedures for the sale of its assets and operations under an asset purchase agreement with the Prepetition Secured Parties as the stalking horse bidder, with customary stalking horse protections, if the Prepetition Secured Parties elect to present a stalking horse bid and, if not, under an asset purchase agreement presented pursuant to the bid procedures, no later than ten (10) business days after the Petition Date. Additionally, the DIP Loan Documents are expected to contain further milestones related to the sale of the Acquired Assets, including (i) the Debtor shall establish a date that is no later than sixty (60) calendar days after the Petition Date as the deadline for the submission of binding bids with respect to the Acquired Assets, (ii) no later than sixty-five (65) calendar days after the Petition Date, the Debtor shall commence an auction for the Acquired Assets, in accordance with the bid procedures; provided that if there is no higher or better offer submitted in comparison to the stalking horse bid(s), no auction shall be held, (iii) no later than seventy (70) calendar days after the Petition Date, the Bankruptcy Court shall have entered an order (which shall be in form and substance acceptable to Lender and the Prepetition Lender) approving the winning bid resulting from the auction of the Acquired Assets or, if no auction is held, approving a sale pursuant to the stalking horse bid(s), and (iv) no later than seventy-five (75) calendar days after the Petition Date, consummate a sale transaction for the Acquired Assets."

Prepetition Indebtedness

The Debtor was indebted and liable to Sandton under Loan and Security Agreement, dated as of April 14, 2022, in the aggregate principal amount of approximately $30 million (the “Prepetition Facility”) between Sandton, as successor-in-trust to Farm Credit (the “Prepetition Lender”). On or about May 13, 2022, Farm Credit perfected a security interest in certain assets of the Debtor through the filing of a UCC Financing Statement (the “Farm Credit UCC”). Farm Credit assigned its rights under the Farm Credit UCC to Sandton in or about March 2023. On or about March 17, 2023, Farm Credit assigned to Sandton all of its rights and interest in the Prepetition Facility and any collateral for the security interest, including its rights under the Prepetition Facility, Bridge Loan, and BofA DACA. 

On or about March 20, 2023, the Sandton and the Debtor entered into an amendment to the Prepetition Facility to increase the Revolving Credit Facility from $10 million to $11 million—providing an additional $1 million in available funding to the Debtor. The amendment and additional $1 million under the Revolving Credit Facility may referred to as the “Bridge Loan”. The Bridge Loan is secured by a lien on the assets of the Debtor to the same extent as the Revolving Credit Facility. As of the Petition Date, the Debtor is informed and believes that the Debtor has drawn approximately $500,000 under the Bridge Loan.

In a filing date press release, the Debtor's parent provides: "On April 14, 2022, Kalera entered into a Loan and Security Agreement ('Loan Agreement') with Farm Credit of Central Florida, ACA ('Farm Credit'), under which Farm Credit agreed to make (i) revolving loans in an aggregate principal amount of up to $10 million and (ii) one or more term loans in an aggregate principal amount up to $20 million (collectively the 'Loans'). On March 21, 2023, Farm Credit informed Kalera that as of the close of business on March 17, 2023, Farm Credit had sold its interest under the Loan Agreement to Sandton Credit Solutions Master Fund V, L.P. ('Sandton')."

Revised DIP Budget [see Exhibit 1 of Docket No. 99]

About the Debtor

According to the Debtor: "As a leader in controlled environment agriculture, Kalera is driven by our belief that vertical farming can play an important role in securing access to fresh produce for a growing world population facing climate change and concerns about the future of traditional farming. Through our proprietary technology, we sustainably grow local, delicious, nutrient-rich, pesticide-free, non-GMO leafy greens year-round. Our automated, data-driven, hydroponic vertical farms produce higher yields and, use 95% less water, and 99% less land than traditional farming. Sold under the Kalera brand, our leafy greens are 'better than organic' and priced competitively, always with the end consumer in mind. Kalera is headquartered in Orlando, Florida with farms in Orlando; Atlanta, Georgia; Houston, Texas; Denver, Colorado; and Kuwait, with additional farms under development."

Corporate Structure

The following includes additional information about the non-debtor entities listed on the organizational chart:

  • Kalera Public Ltd. Co. (“Kalera PLC”) is an Irish public limited company. Kalera PLC is the parent company of Kalera S.A.
  • Kalera S.A. (“Kalera S.A.”) is a société anonyme existing under the laws of the Grand Duchy of Luxembourg, having its registered office at 15, boulevard Franklin D. Roosevelt, L-2450 Luxembourg, Grand Duchy of Luxembourg, Kalera SA is a wholly owned subsidiary of Kalera PLC.
  • Kalera Real Estate Holdings, LLC is a Delaware limited liability company with its principal place of business at 7455 Emerald Dunes Dr., Suite 2100, Orlando, Florida, 32822. It is a wholly owned subsidiary of Kalera, Inc.
  • Iveron Materials, Inc. (“Iveron”) is a Delaware c-corporation established as a geopolymer concrete business (which is conducted separately from the vertical farming business) with its principal place of business at 7455 Emerald Dunes Dr., Suite 2100, Orlando, Florida, 32822. Iveron is a wholly owned subsidiary of Kalera S.A.
  • Vindara Inc. (“Vindara”) is a Delaware corporation with its principal place of business at 7455 Emerald Dunes Dr., Suite 2100, Orlando, Florida, 32822. Vindara is a wholly owned subsidiary of Kalera S.A

Read more Bankruptcy News

The post Kalera, Inc. – Vertical Farming Specialist Gets Authority for a Further $1mn in New Money DIP Financing from Prepetition Lender (and Presumed Loan-to-Own Stalking Horse) Sandton Capital Solutions appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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