CASE SUMMARY: Air Methods Files Prepackaged Chapter 11 to Effectuate Balance Sheet Restructuring With Support of Sponsor American Securities, Ad Hoc Lender Group; Rights Offerings Backstopped by Prepetition Lenders to Unlock at Least $175M of New Capital

 

Summary
Air Methods, an air medical service provider, filed for bankruptcy today to implement a $1.7 billion balance sheet restructuring
The debtors plan to fund the case with $155 million DIP financing consisting of $80 million of new money and a rollup of $75 million in prepetition debt
The company attributes the bankruptcy filing to labor shortages, increased costs, severe weather, tightening debt markets and payor reimbursement issues

Air Methods, a Greenwood Village, Colo.-based air medical service provider, and several affiliates filed petitions today, Tuesday, Oct. 24, reporting $1 billion to $10 billion in both assets and liabilities and approximately $2.2 billion in funded debt obligations. The debtors enter bankruptcy with a prepackaged chapter 11 plan reflecting a restructuring support agreement with first lien lenders and equity sponsor American Securities. American Securities owns 94.7% of the company’s equity. The RSA is supported by an ad hoc group holding approximately 71.6% of the aggregate outstanding principal amount of prepetition secured loan claims and 66.8% of the aggregate outstanding principal amount of prepetition unsecured note claims.

The debtors say they already have the requisite support to confirm the plan and expect to emerge from bankruptcy with an “optimal capital structure by year end.” The debtors are seeking a combined hearing on plan confirmation and disclosure statement approval on Dec. 4.

Air Methods proposes a superiority and priming DIP term loan in the aggregate principal amount of up to $155 million comprising: (i) $40 million new-money term loan upon entry of the interim order; (ii) $40 million new-money delayed-draw term loan to be made in a single draw following entry of the final order; and (iii) a rollup of prepetition term loans in the aggregate principal amount of up to $75 million upon entry of the final order.

Pursuant to the RSA, the ad hoc group has committed to backstopping the $80 million new-money portion of the proposed $155 million DIP facility, and all prepetition lenders would be eligible to participate pro rata in the DIP financing. The DIP financing would convert into exit financing on the effective date of the plan.

The debtors’ interim CFO and first day declarant, Jason Kahn, a senior director at Alvarez & Marsal, says the restructuring would reduce debt by approximately $1.7 billion - approximately 74% of debt outstanding on the petition date - and would inject at least $175 million of new capital into the company through an equity rights offering, or ERO, and debt rights offering, or DRO.

According to Kahn, the capital raise would be backstopped by members of the ad hoc group under the terms of the purchase commitment and backstop agreement, discussed further below. Creditors would have the opportunity to participate in the DRO and ERO, which would fund plan distributions, and the financing would ensure the company has $135 million of minimum liquidity, Kahn states.

As detailed below, the plan would leave aircraft lease and financing counterparties, vendors, suppliers and other general unsecured creditors unimpaired.

The company’s United Rotorcraft and Blue Hawaiian businesses are not included in the chapter 11 cases. Blue Hawaiian is “the largest provider of helicopter tours and charter flights in Hawaii,” Air Methods notes in a press release.

The first day hearing is scheduled for today, Tuesday, Oct. 24 at 3:30 p.m. ET.

The company’s prepetition capital structure is summarized below.
 
The company has a $1.3 billion credit facility, which consists of $1.175 billion outstanding under a term loan facility, $115.8 million drawn under a revolving credit facility and $9.2 million of issued and outstanding letters of credit. According to the Kahn declaration, the credit facility is unconditionally guaranteed by ASP AMC Intermediate Holdings and each of the subsidiary guarantors, and is secured by a first-priority security interest in all or substantially all of the assets of the debtors, subject to certain exceptions and permitted liens, including those under the prepetition securitization program.

Under the securitization program, certain debtors entered into sale and contribution agreements with certain nondebtors, with the debtors transferring certain trade receivables in exchange for cash and/or a contribution of capital. The nondebtor entities borrow the cash to fund the purchase of the receivables pursuant to the receivables financing agreement dated June 28, 2022, with PNC Bank as administrative agent.

The receivables securitization program has a commitment of $200 million, according to the motion to continue the program. The debtors state that they have “sized the proposed DIP Facility assuming the Debtors will be authorized to continue the Securitization Program postpetition.”

A comparison of the debtors’ capital structure before and after the contemplated restructuring transactions is shown below. A footnote indicates that the “chart includes an illustrative reference to the contemplated postpetition securitization program facility.” The debtors “intend for these aircraft financing arrangements to ride through these chapter 11 cases unimpaired.”
 
According to Reorg’s CLO database, the largest holders of Air Methods’ term loan include Fortress Investment Group, which holds approximately $177.2 million, PGIM, which holds about $172.3 million, and Ares Management, which holds about $158.6 million.
 
The case has been assigned to Judge Marvin Isgur (case No. 23-90886). The debtors are represented by Weil Gotshal as legal counsel, Lazard as financial advisor and Alvarez & Marsal as restructuring advisor. Epiq is the claims and noticing agent. Davis Polk is legal advisor, and Evercore is financial advisor to the ad hoc group of lenders.

DS Approval Motion / Confirmation Timeline

The debtors’ disclosure statement approval motion proposes the following confirmation-related timeline:

• Nov. 20: Plan supplement filing deadline;
• Nov. 27: Deadlines to vote on the plan and object to the plan and DS;
• Nov. 30: Deadline to reply to plan/DS objections;
• Dec. 4: Combined hearing on plan confirmation and disclosure statement approval; and
• Jan. 6: deadline to file schedules of assets and liabilities and statements of financial affairs.

Organizational Chart
 

Background / Events Leading to Bankruptcy Filing

Founded in 1980 and headquartered in Greenwood Village, Colo., Air Methods is the “market-leading provider for air medical emergency services” in the U.S. Air Methods provides more than 100,000 transports a year. The debtors have a fleet of approximately 390 helicopters and fixed-wing aircraft serving 47 states from over 275 bases in 40 different states, according to Kahn.

The debtors have approximately 4,900 employees, including approximately 3,700 “front-line” employees consisting of pilots, mechanics and clinicians, says Kahn. Approximately 1,170 of the debtors’ employees are pilots who are unionized under the debtors’ collective bargaining agreement.

Although Air Medical Services is the core of the debtors’ business, the debtors and their nondebtor affiliates operate segments outside of the healthcare space, including Blue Hawaiian, United Rotorcraft and Spright, which account for “~12% of consolidated revenue and EBITDA,” according to Kahn.

The debtors’ business segments are:
 

• Air Medical Services: The debtors use aircraft (both leased and owned) to respond to emergency dispatch calls and pre-scheduled calls.
   
• United Rotorcraft (nondebtor): Specializes in the design, manufacture and certification of aeromedical and aerospace technology, which the debtors sell to third parties for use in providing life-saving services.
   
• Blue Hawaiian (nondebtor): The largest provider of helicopter tours and charter flights in Hawaii.
   
• Other nondebtor operations: Air Methods has invested in separate growth-stage businesses, including: Ascend, a state-of-the-art clinician education program; Spright, a drone business serving medical and utility markets; and Skyryse, a technology developer that improves flight operation systems.

2019 Operational Turnaround and 2020 Events

In 2019, the debtors implemented certain operational initiatives, closed unprofitable bases and increased transport conversions, according to Kahn, resulting in “material EBITDA improvements heading into 2020.” However, the debtors also began to experience “unforeseen macroeconomic and legislative changes” that impacted their business and ultimately led to the chapter 11 filing: labor shortages, increased costs, severe weather, tightening debt markets and payor reimbursement issues.

On the payor reimbursement issues, the debtors explain that when they transport a patient and generate a bill, that bill usually is passed to a third-party payor, which pays all or a substantial portion of the outstanding amounts.

Regulatory changes have impacted both private and public reimbursement rates, according to Kahn. First, the No Surprises Act, or the NSA, which went into effect in January 2022, aimed to address lack of transparency in the American healthcare system and protect patients from large out-of-network bills, says Kahn. At the same time, the NSA also introduced additional “red tape” and complexity in the debtors’ ability to collect on their receivables, the first day declaration continues.

Specifically, Kahn explains that the NSA introduced a new method of resolving disputed claims through the NSA’s independent dispute resolution process, or IDR. Once in IDR, a third-party independent arbiter resolves the dispute and determines the reimbursement amount. For most of the claims resolved through the IDR process, the debtors say they have received favorable rulings with respect to the net revenue per transport awarded.

However, the IDR process takes time to reach a final conclusion, which “materially delays the Debtors’ cash collection associated with that claim,” says Kahn. “As a result, the Debtors can face unpredictable cash flows, which complicate the Debtors’ ability to service debt obligations and forecast their expected cash flows” (emphasis added).

Addressing public payors, new legislation and regulation have (or will) reduce reimbursement rates, Kahn explains. The first day declaration notes that Medicaid and Medicare reimbursement rates cover less than half the costs for providing a transport.

As for Veterans Administration-covered transports, they currently pay above Medicaid and Medicare, but in late 2020, the VA announced a new rule that would reduce VA reimbursement rates to match the rates reimbursed by Medicare. The new rule may be implemented as early as February 2024, the first day declaration observes. If the new rule goes into effect, “the decrease in reimbursement rate would be pronounced and would put further downward pressure on the Debtors’ ability to generate positive cash flows,” stresses Kahn (emphasis added).

2022-2023 Operational Turnaround

The debtors took “significant actions” to address their business challenges, including initiating a review of businesses and operations in July 2022. The debtors implemented cost reduction initiatives as well as growth initiatives focused on “(i) improving reimbursement rates with insurance providers, (ii) capitalizing on selective growth investments in strategic ‘Greenfield’ locations, and (iii) expanding offerings in tangential businesses such as Ascend, their clinical training offering, and non-emergent fixed-wing transfer services,” according to Kahn. Despite these initiatives, the debtors’ highly levered capital structure along with certain “uncontrollable factors” forced the debtors to focus on a more comprehensive restructuring.

Prepetition Restructuring Efforts

In late 2022, the debtors engaged Weil Gotshal and Lazard to assist with a broader restructuring. In January 2023, the debtors’ board formed a special committee comprising three independent directors - Patrick Bartels, Steven Gorman and William Transier - to protect the independence of the strategic review process.

Also in early 2023, ahead of debt maturities for the prepetition credit facility, the debtors began to engage with the ad hoc group and its advisors Davis Polk and Evercore. The discussions led to the parties’ agreement to pursue a prepackaged chapter 11 case to deleverage the business.

The debtors’ largest unsecured creditors are below. Wilmington Trust NA, trustee for the debtors’ unsecured notes, is listed as the largest unsecured creditor with a claim of approximately $516.7 million.

 

Representatives
Role	Name	Firm	Location
Debtors' Counsel	Ray Schrock Kelly DiBlasi Kevin Bostel Alexander P. Cohen	Weil, Gotshal & Manges	New York
	Gabriel A. Morgan		Houston
Debtors' Investment Banker	Parry Sorensen	Lazard Frères & Co.	New York
Debtors'  Financial  Advisor & CRO	Jason Kahn	Alvarez & Marsal North America	New York
Counsel to DIP Agent	Jonathan Levine	McDermott Will & Emery	New York
Counsel to DIP Lender	Adam L. Shpeen Stephen Piraino	Davis Polk & Wardwell	New York
Counsel to  PNC as Administrative Agent	Brian Trust Dabin Chung	Mayer Brown	New York
Counsel to RBC as  Prepetition Administrative Agent	Marcus Dougherty Meir Hornung Jaemin Lee	Milbank	New York
Counsel to Ad Hoc Lender Group	NA	Vinson & Elkins	NA
Financial Advisor to Ad Hoc Lender Group	NA	Evercore Group	New York
Counsel to Consenting Sponsor	Paul Basta Jacob Alderstein Kyle R. Satterfield	Paul, Weiss, Rifkind, Wharton & Garrison	New York
U.S. Trustee	Vianey Garza Jana Smith Whitworth	Office of the U.S. Trustee	Houston
Debtors’ Claims Agent	Kate Mailloux	Epiq	New York

Plan / Disclosure Statement

Below is a chart of the plan’s classes, along with their impairment status and voting rights.
 
Treatment of Claims and Interests

The debtors’ plan treatment includes the following classification of and proposed distributions to holders of allowed claims and interests. The estimated recoveries are premised on a $267 million plan equity value and account for dilution from various sources including reorganized equity issued pursuant to the management incentive plan:
 

• Class 1 - Other priority claims: Holders of such claims would receive cash or other treatment sufficient to render their claims unimpaired.
  • Projected recovery: 100%
     
• Class 2 - Other secured claims: Holders of such claims would receive cash, be reinstated or receive other treatment sufficient to render their claims unimpaired.Projected recovery: 100%
   
• Class 3 - Prepetition secured loan claims: Holders of such claims would receive a pro rata share of:
  • (i) the prepetition secured loan claim equity distribution, subject to dilution as discussed below; (ii) the DRO subscription rights with the DRO equity interests, including the DRO backstop shares, pegged at 40% of the new interests subject to dilution by new common stock issued upon the exercise of the new warrants and management incentive plan and the ERO equity interests; and (iii) and the ERO subscription rights, which would be issued at a 35% discount to the plan equity value.
    
    Alternatively, holders may elect to exercise the equity-cashout option and receive cash up to the adjusted $135 million adjusted private placement amount in lieu of the prepetition secured loan claim equity distribution and forgoing its ERO subscription rights. The equity-cashout option would be funded by proceeds from the private placement (discussed below).
    
    The prepetition secured loan claim equity distribution is defined in the plan as 100% of reorganized equity subject to dilution by the debt rights offering equity interests, or DRO equity interests; DRO backstop commitment premium shares; equity rights offering equity interests, or ERO equity interests; ERO backstop commitment premium shares; private placement commitment shares; private placement premium shares; the prepetition unsecured note claims recovery pool; and new common stock issued upon the exercise of the new warrants and management incentive plan).
     
  • The distribution of reorganized equity is subject to procedures required by the U.S. Department of Transportation to ensure that non-U.S. citizens will not hold more than 24.9% or 49% (if the requisite holders are citizens of a country with an “Open Skies” agreement with the U.S.) of equity in the reorganized company.
     
  • Allowance: $1.175 billion of term loans (in principal amount) and $115.8 million of revolving loans (in principal amount) plus accrued interest, fees and other amounts owing under the prepetition credit agreement.
     
  • Projected recovery: 16%. A footnote notes that the amount assumes the plan equity value and estimated adjusted ERO and DRO, amounts as set forth in the financial projections, including an adjusted $135 million adjusted private placement amount. The recoveries do not reflect the value of securities issued in consideration for the private placement premium, ERO backstop commitment and DRO backstop commitment premiums as provided in the purchase commitment and backstop agreement.
     
• Class 4 - Prepetition securitization program claims: Holders of such claims would receive cash, reinstatement in accordance with the exit financing documents or other agreed treatment.
  • Projected recovery: 100%
     
• Class 5 - Substitute insurance collateral facility (SICFA) claims: Holders of such claims would receive payment or be entitled to dispute their claims in the ordinary course of business.
  • Projected recovery: 100%
     
• Class 6 - Prepetition aircraft financing claims: Holders of such claims would receive payment or be entitled to dispute their claims in the ordinary course of business.
  • Projected recovery: 100%
     
• Class 7 - Prepetition unsecured note claims: Holders of such claims would receive a pro rata share of:
  • (i) the prepetition unsecured note claims recovery pool (defined as 2% of reorganized equity subject to dilution by the ERO equity interests and new common stock issued upon the exercise of the new warrants and management incentive plan);
     
  • (ii) new tranche 1 warrants representing up to 10% of reorganized equity (subject to dilution by the MIP) exercisable up to 5.5 years after the plan effective date with the excise price to be set forth in the new warrants agreement based upon a $1.75 billion total enterprise value at the plan effective date; and
     
  • (iii) new tranche 2 warrants representing up to 5% of reorganized equity (subject to dilution by the MIP) exercisable up to 5.5 years from the plan effective date with the excise price to be set forth in the new warrants agreement based upon a $2.25 billion total enterprise value at the plan effective date).
     
  • Allowance: $500 million plus accrued interest, fees and other amounts owing under the prepetition credit agreement.
     
  • Projected recovery: 1%. A footnote notes that this amount assumes the plan equity value and estimated adjusted ERO and ERO amounts as set forth in the financial projections, including the adjusted $135 million adjusted private placement amount. The recoveries do not reflect the value of securities issued in consideration for the private placement premium, ERO backstop commitment and DRO backstop commitment premiums as provided in the purchase commitment and backstop agreement.
     
• Class 8 - General unsecured claims: Holders of such claims would be paid in cash on the effective date and claims after the effective date would be paid or disputed in the ordinary course of business.
  • Projected recovery: 100%
     
• Class 9 - Intercompany claims: Claims would be adjusted, reinstated or discharged.
  • Projected recovery: 100%
     
• Class 10 - Existing equity interests: Claims would be canceled, released and extinguished without distribution.
  • Projected recovery: 0%
     
• Class 11 - Intercompany interests: Claims would be adjusted, reinstated or discharged.

Debt and Equity Rights Offerings

The debtors contemplate an up-to-$200 million fully backstopped debt rights offering, available to eligible holders of prepetition secured loan claimants.

The plan also contemplates an equity rights offering that would allow secured debt holders to purchase their ratable share of up to $135 million of new equity at a 35% discount to plan value.

Private Placement

As detailed above, the plan also includes an equity cash-out option for debtholders that elect to not receive new equity in the reorganized debtors. This would be funded by a private placement of up to $135 million. According to the disclosure statement, the proceeds from the private placement would be used to fund the equity-cashout option and the debt rights offering backstop premium cash.

The amount raised through the equity rights offering would reduce the level of the private placement. The private placement parties would receive a premium, paid in equity at a 35% discount to plan value, equal to 10% of the amount of the private placement, or $135 million less the amount raised in the equity rights offering.

Exit Term Loan Facility

The debtors contemplate exiting chapter 11 with a five-year senior secured first lien term loan facility with an aggregate balance of $250 million. The exit term loan would consist of $175 million of loans through the debt rights offering and $75 million of rolled-up DIP term loans. The facility would bear interest at the borrower’s election of either i) term SOFR + 9%, subject to a SOFR floor of 4%, or ii) base rate + 8%, subject to a base rate floor of 3%. In either case, interest would be payable in cash on a quarterly basis.

Default interest is 2% above the then-prevailing rate. The facility would be secured on a first-priority basis on substantially all assets of the credit parties, subject to exceptions for priority liens on assets securing ABL and receivables facilities.

The term sheet notes that there may be an offset amount where the debt rights offering term loans may be increased by a debt rights offering liquidity shortfall, while DIP rolled-up term loans would be reduced on a dollar-for-dollar basis by the same.

The term sheet adds that “DRO Term Loans will be fungible with the DIP-to-Exit Term Loans and constitute a single class of term loans.”

The DRO term loans would be used to make payments and distributions under the plan and for general corporate purposes, whereas the proceeds of the DIP-to-exit term loans would be used to refinance and discharge the DIP rolled-up loan claims. The term sheet specifies that once repaid, the exit term loan funds may not be reborrowed.

The term loans amortize in equal quarterly installments at an annual rate of 1% beginning at the end of the first quarter following the closing date. The term loans are subject to certain mandatory prepayments that may be caused by asset dispositions, excess cash flow and/or incurrence of certain debt.

DIP Backstop Agreement

The backstop agreement features a cash-break fee with respect to the debt rights offering of 9% of the plan equity value, and with respect to the equity rights offering and private placement, 8% of the aggregate committed amount of $135 million, calculated at a 35% discount to plan value.

The backstop agreement also allows unrestricted transfer rights for the commitment parties to related funds or other commitment parties. The backstop parties may transfer rights to other third parties in certain circumstances.

The DIP and backstop commitments in Schedule I are marked as “intentionally omitted.”

Liquidation Analysis

The debtors, along with their financial advisors, have provided a hypothetical liquidation analysis. The debtors estimate midpoint net proceeds of $320 million, with a range of $217 million to $370 million.

In a liquidation scenario, the debtors project that secured claims would recover $131 million at the midpoint, with a range of $81 million to $180 million.

Financial Projections

The debtors anticipate exit term loans of $250 million at a rate of SOFR + 9% with annual amortization of 1% beginning at the end of the first full quarter following emergence. The debtors also assume the aircraft financing will have interest rates ranging from 3% to 11%.

At emergence, the debtors estimate they will have liquidity of approximately $135 million and “at least” $30 million of cash at emergence. The debtors envision a pro-forma capital structure and liquidity as shown below:
Plan, DIP and RSA Milestones

The restructuring milestones contemplated under the plan and DS are as follows:
 

• Oct. 27 (three days after petition date): Entry of the interim DIP order;
• One day after execution of purchase commitment and backstop agreement: Deadline to file a motion seeking court approval of the agreement;
• Dec. 6 (43 days after petition date): Deadline to file plan supplement;
• Dec. 13 (50 days after petition date): Voting deadline;
• Dec. 18 (55 days after petition date): Entry of plan confirmation order; and
• Dec. 29 at 11:59 p.m. ET: Occurrence of the plan effective date.

Management Incentive Plan

The reorganized board is authorized to implement a management incentive plan after the plan effective date, subject to the consent of the RSA parties.

Other Plan Provisions

The plan provides for releases of the debtors, the reorganized debtors, the debtors’ nondebtor affiliates, the consenting creditors, sponsor American Securities and affiliates, the prepetition agent and indenture trustee, the DIP agent and lenders, the DRO, ERO and private placement commitment parties and the securitization program parties as well as holders of claims and interest who vote to accept the plan. Parties that opt out of the release provisions would not be a released party.

In addition, the plan includes an exculpation provision in favor of the debtors and their independent directors.

The members of the reorganized board will be disclosed in the plan supplement.

DIP Financing Motion / Cash Collateral Motion (Term Sheet / Execution Version)

The DIP facility includes a superpriority and priming DIP term loan in the aggregate principal amount of up to $155 million, comprising: (i) a $40 million new-money term loan upon entry of the interim order; (ii) a $40 million new-money delayed-draw term loan to be made in a single draw following entry of the final order; and (iii) a rollup of prepetition term loans in the aggregate principal amount of up to $75 million upon entry of the final order.

Certain members of the ad hoc group have also committed to backstop the new-money portion of the DIP facility in exchange for receiving certain fees. Wilmington Savings Fund Society FSB will serve as DIP agent.

There is no “holdback” on the DIP facility, as it is structured to be available to all prepetition lenders on a pro rata basis so long as the prepetition lender executes the RSA.

At the borrower’s election, the DIP financing bears interest at either (i) term SOFR plus a credit spread adjustment of 0.11448% (subject to a 1% floor) plus 10%, or (ii) base rate (subject to a 2% floor) plus 9%. Upon a default and on written request of the required lenders, the relevant overdue amounts under the DIP facility will bear interest at (i) in the case of principal or interest, 2% per annum plus the interest rate applicable to the applicable term loans or (ii) in the case of fees and all other amounts, 2% plus the then applicable rate for base rate term loans. The DIP facility matures four months after the closing date.

The DIP proceeds would be used in accordance with the budget but may not be used for purposes that are contrary to the rights of the prepetition secured parties and DIP secured parties such as for investigations and litigation against those parties. The proposed budget for the use of the DIP facility is HERE.

The debtors filed a declaration by Lazard managing director Parry Sorensen in support of the DIP motion. Sorensen stresses that the DIP is a “critical component to the overall restructuring and provides the necessary liquidity for the Debtors to maintain operations during the course of these chapter 11 cases.”

To secure the DIP financing, the debtors propose to grant liens on any unencumbered property and priming liens.

The DIP facility contemplates a “roll-up” of up to $75 million of indebtedness outstanding under the prepetition term loans held by the DIP lenders. The amount of new money to be provided under the DIP facility ($80 million) exceeds the rollup portion of the DIP facility (up to $75 million), but roughly equates to a 1:1 ratio, according to Sorensen. “The DIP Facility’s roll-up feature was a critical inducement for the DIP Lenders to provide financing on the proposed terms and conditions,” says Sorensen.

The facility includes various fees, including:
 

• Backstop premium: The debtors would pay a backstop premium in an amount equal to 8% of the aggregate amount of such DIP backstop party’s DIP commitments as of the support effective date, payable in cash on the closing date.
   
• Upfront discount: The debtors would pay an amount equal to 2% of (i) the aggregate amount of the initial term lender’s initial term loan commitment on the closing date, payable in cash, and (ii) the aggregate amount of the delayed-draw term lender’s delayed-draw term loan commitment on the delayed-draw term loan borrowing date, payable in cash.
   
• Fees and expenses: The debtors would pay all reasonable and documented out-of-pocket fees, costs and expenses incurred or accrued by the DIP agent and the DIP lenders.

The borrower may make voluntary prepayments without penalty (other than customary breakage costs). The following amounts are mandatory prepayments:
 

• 100% of the net cash proceeds from any issuance or incurrence of postpetition indebtedness or equity interests by Holdings or any of its restricted subsidiaries (other than any debt or equity interests permitted by the credit agreement);
   
• 100% of the net cash proceeds from any prepayment asset sale or “Casualty Event,” in each case in excess of $250,000 in any single transaction or series of related transactions, subject to the borrower’s right to apply the proceeds pursuant the budget; and
   
• 100% of “Extraordinary Receipts” in excess of $1 million over the life of the DIP facility, subject to the borrower’s right to apply the proceeds pursuant the budget.

The company proposes the following adequate protection to its prepetition lenders: replacement liens, allowed superpriority administrative expense claims, payment of the professionals’ fees and expenses, and financial reporting requirements. Upon the entry of a final order, the lenders would receive a lien on the proceeds of avoidance actions.

In addition, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b).

The post-termination carve-out for professional fees is $3.5 million.

The lien challenge deadline is (i) the earlier of five business days before a confirmation hearing and (x) as to the official committee of unsecured creditors, 60 days after its appointment, (y) if the cases are converted to chapter 7 or a chapter 7 trustee or a chapter 11 trustee is appointed or elected, then the challenge period for the chapter 7 or chapter 11 trustee would be extended to the date that is the later of 75 days after entry of the interim order or the date that is 30 days after its appointment, or (z) as for all other parties in interest, 75 days after entry of the interim order.

The UCC lien investigation budget is $75,000.

The schedule for the DIP commitments and DIP backstop commitments is marked as “intentionally omitted.”

Other Motions

The debtors also filed various standard first day motions, including the following:
 

• Motion for joint administration / Order
  • The cases will be jointly administered under case No. 23-90886.
• Motion to file and redact a consolidated creditor matrix
  • The motion requests relief to redact names and addresses of employees, contractors, directors and customers.
• Motion to continue receivables securitization program
  • The motion seeks authorization to continue the operation of its receivables securitisation program. The debtors estimate that $167.6 million of principal is outstanding to nondebtor borrowers as of the petition date.
• Motion to maintain customer programs
  • The debtors estimate that there are approximately $19.7 million of customer refunds and credits outstanding as of the petition date and are seeking authority to continue their customer programs in the ordinary course of business.
• Motion to pay employee wages and benefits
  • The motion seeks to pay approximately $42.9 million of employee obligations in the ordinary course of business.
• Motion to pay prepetition trade claims
  • The motion seeks to pay approximately $48.5 million in trade claims during the interim period.
• Motion to use cash management system
  • The company has bank accounts with KeyBank NA, PNC Bank, First Hawaiian Bank, Commerzbank, Hongkong and Shanghai Banking Corp. and JPMorgan Chase Bank.
• Motion to continue insurance and surety bond programs
• Motion to pay taxes and fees
  • The debtors estimate that approximately $4.6 million of taxes and fees will become due and owing in the ordinary course of business and are seeking authority to pay prepetition taxes and fees.
• Motion to provide utilities with adequate assurance
• Application to appoint Epiq as claims agent