Checkout Holding Corp., a.k.a. Catalina Marketing, has reached a restructuring support agreement with an ad hoc group of first lien lenders and an ad hoc group of second lien lenders that contemplates a chapter 11 bankruptcy filing on Wednesday, say sources. The company is asking lenders outside the groups to sign on to the RSA by midday on Monday, according to sources.
Weeks of RSA
negotiations between Catalina and its creditors culminate in the agreement, which will hand majority ownership of the company to a group of first lien lenders providing $165 million in new money to support operations, add the sources.
The RSA, which was posted to Intralinks on Friday night, tracks closely to the first lien lender group’s proposal
disclosed by the company in cleansing materials last week, but it shows a resolution to a dispute between first and second lien lender groups over consideration to second lien lenders, sources say. After several back and forths with the ad hoc group of first lien lenders,
the ad hoc group of second lien lenders has agreed to accept 10% of reorganized equity as consideration in a chapter 11 plan, with the remaining equity going to non-rolled-up prepetition first lien claims (all subject to MIP dilution). The dispute around consideration to second lien lenders, say sources, relates to a disagreement over how to value unencumbered assets of the company - including certain equity in the foreign business, which has outperformed the U.S. business, and the Nielsen Catalina Solutions business, which is a joint venture between Nielsen and Catalina.
The ad hoc first lien lender group
previously proposed that second lien claims receive only 4% of reorganized equity, later raising their offer to 7% in equity after exchanging proposals with the ad hoc group of second lien lenders. The second lien ad hoc group’s Nov. 30 proposal had requested between 10% (plus warrants) and 12% of reorganized equity.
After skipping Nov. 30 interest payments on the company’s first and second lien term loans, Catalina’s five-business-day grace period expired on Friday. Signatories to the RSA have agreed to forbear, giving the company a few more days past the grace period to lock in RSA signatures, sources add.
In line with the late November proposals disclosed in last week’s cleansing materials, DIP financing outlined in the RSA will include $125 million in new money provided by the ad hoc group of first lien lenders and a rollup of $150 million in prepetition first lien claims. The parties contemplate the new-money portion of the DIP rolling into a first lien first-out exit facility upon emergence, and that FLFO facility will also include an additional $40 million in new money from the ad hoc first lien lenders in the form of a delayed-draw commitment. DIP rollup claims are to receive a $150 million first lien last-out exit facility upon emergence.
According to last week’s disclosures, Catalina’s capital structure currently includes a $100 million first lien revolver (set to expire in April) that, as of Oct. 16, had $55 million outstanding in addition to $5 million in outstanding letters of credit; a $1 billion first lien term loan due April 2021; a $460 million second lien term loan due April 2022; and a $26 million intercompany loan from Catalina Marketing Corp. to Catalina Marketing Deutschland GmbH; The company’s cash balance totaled $48 million as of Nov. 2. The company’s holding company PDM Intermediate Holdings B Corp. also has $328 million in unsecured PIK / toggle notes due in 2023 that are set to toggle to mandatory cash-pay in April. Consistent with the previously disclosed proposal, the RSA contemplates no recovery to those unsecured claims, sources add.
Catalina has been in refinancing negotiations with creditors and their advisors
for months, with the talks morphing into in-court restructuring discussions during that time. As operations declined in 2018 - particularly in the U.S. business, which comprises a majority of revenue - and the company anticipated missing its EBITDA projections for the second half of the year because of declines in the domestic business, Catalina
hired FTI Consulting in August.
The ad hoc group of first lien term loan lenders is advised by Jones Day and Evercore, the ad hoc group of second lien lenders is advised by Paul Weiss and PJT Partners, a Crescent-led ad hoc group of noteholders is advised by Debevoise & Plimpton and Houlihan Lokey, the company’s revolver lenders are represented by Davis Polk and Ankura, and the company is advised by Weil Gotshal, Centerview Partners and FTI Consulting.
The company declined to comment for this story.
Editor’s note: This story was first published on Saturday, Dec. 8 and was resent on Monday, Dec. 10 for readers who did not see it during the weekend.