Relevant Documents:Interim DIP Order (with judge’s changes)
Debtors’ Revised Proposed Order
Judge Stuart Bernstein entered an interim order this morning approving the Aegean Marine debtors’ proposed
DIP financing from affiliates of strategic partner Mercuria Energy Group Ltd. Judge Bernstein granted interim approval of the DIP after the debtors filed a revised proposed order early this morning, which appears to memorialize the
agreement announced on Thursday between the debtors and the ad hoc group of convertible noteholders. Although Judge Bernstein made slight revisions to the proposed form of order, the entered version largely reflects the version submitted by the debtors earlier this morning. As previously proposed, the approximately $532 million in DIP financing consists of a $160 million U.S. revolving credit facility, a $300 million global revolving credit facility and a multiple-delayed-draw term loan credit facility in an aggregate principal amount of $72 million ($40 million on an interim basis).
Consistent with the agreed proposed order submitted this morning, Judge Bernstein’s signed order no longer authorizes the DIP lenders and prepetition secured parties to credit bid. The initial proposed interim DIP order filed by the debtors earlier this week had stated that these parties would “have the right to credit bid the entirety of (or any portion of) the full amount of the DIP Obligations and/or Prepetition Secured Obligations (as applicable) in connection with any asset sale process, including without limitation, sales pursuant to section 363 of the Bankruptcy Code or included as part of any plan of reorganization subject to confirmation under section 1129 of the Bankruptcy Code, and such right to credit bid shall not be subject to challenge or objection.” This sentence is not part of the signed order.
The ad hoc group, which holds approximately 74% in aggregate principal amount of Aegean Marine’s two series of convertible notes,
objected on Wednesday to interim approval of the debtors’ financing from Mercuria. A key focus of the objection was the credit bidding provision, as well as the rollup of Mercuria’s prepetition obligations, particularly the proposal that 50% of prepetition ABL obligations would be rolled up immediately upon entry of the interim order.
Also consistent with the agreed order filed earlier today, the interim financing that has now been approved by the court
contains significant revisions to the rollup mechanism:
- The order no longer provides for the immediate rollup of 50% of prepetition ABL obligations upon entry of the interim order;
- The order retains the “creeping roll-up” of the prepetition ABL obligations between entry of the interim order and entry of the final order with respect to cash proceeds of priority collateral securing the prepetition ABL obligations;
- The order no longer includes the statement that “upon entry of the Final Order, all outstanding Prepetition ABL Obligations shall become DIP Obligations[.]”
In their objection, the ad hoc convertible noteholder group also argued that the proposed financing was an “insider transaction” designed to advance Mercuria’s “aggressive loan-to-own strategy” while impeding the debtors’ ability to pursue alternative transactions. In the objection and at Wednesday’s
first day hearing, the ad hoc group also argued that DIP liens and claims should not extend to debtors that were not prepetition obligors with respect to debt held by Mercuria. Further, the group asserted that the court should not approve proposed DIP liens on proceeds of litigation claims such as those related to prepetition fraud and the related
write-off of $200 million of accounts receivable.
The now-approved interim DIP order contains a number of related changes that appear to be aimed at addressing these issues raised in the objection, such as Mercuria’s alleged control over the debtors. For instance:
- In updated language that reflects slight revisions by the judge, the granting of any liens and/or claims to “(i) the DIP Lenders on account of the Roll Up or (ii) the Prepetition Secured Parties as adequate protection, in each case at Debtors that were not Prepetition Obligors is without prejudice to their right (or the right of an Official Creditors’ Committee) at the final Hearing to object to the granting of such claims and/or liens.” In the event such an objection is sustained, it would apply retroactively to the date of the interim order;
- The approval of the Mercuria stalking horse bid has been removed from the list of the DIP lenders’ conditions to willingness to lend;
- The releases of the DIP secured parties and prepetition secured parties are now explicitly “[s]ubject to Section 4.1 and the challenge rights granted thereunder”;
- The section on payment of DIP premiums and other expenses now states that “payment of any commitment fee shall be limited to the fee payable on such borrowings or use of ABL Cash Collateral”;
- The order explicitly clarifies that “nothing in this Interim Order shall be deemed to preclude any party with standing from challenging the value of (i) liens on the Debtors’ assets, (ii) the assets underlying such liens, or (iii) any other assets of the Debtors (including but not limited to any asserted total enterprise value)”; and
- The debtors’ payment of the prepetition secured parties’ fees and expenses, including for counsel from Allen & Overy, Willkie Farr & Gallagher, Milbank Tweed and Norton Rose Fulbright, has been made subject to entry of the final DIP order.
In addition, a number of factual findings or statements of the debtors’ belief with respect to the justification of the interim DIP financing, or its benefits, have now been deleted. These include statements that: the priming of prepetition liens “will enable the Debtors to continue to operate their businesses for the benefit of their Estates and stakeholders”; that the stalking horse bid is “integral to the value” provided to the DIP secured parties and necessary to maximize the value of the DIP collateral; and that the DIP loan documents are supported by reasonably equivalent value and were negotiated in good faith.
In their revised proposed DIP order, the debtors updated some provisions to state that they would be “[s]ubject to the Final Order, and only effective upon the entry of the Final Order.” In the order ultimately entered by the court this morning, Judge Bernstein revised many instances of this language to: “only to the extent expressly provided in the Final Order[.]”
At Thursday’s hearing, Judge Bernstein set a deadline of 8:30 a.m. ET today, Friday, Nov. 9, for the filing of any further objections to the request for interim DIP financing. No objections were filed by the deadline, and the court subsequently entered the order. Debtors’ counsel has indicated that the debtors will seek final approval of the DIP financing at a hearing likely to be scheduled for early December.