WOM SA
CASE SUMMARY: Chilean Broadband Provider WOM SA Files Freefall Ch. 11 to Reorganize Capital Structure; $210M DIP to Pay Critical Non-US Creditors, Pay Down Securitization Facility
Mon 04/01/2024 16:10 PM
Relevant Documents:
Voluntary Petition
Press Release
First Day Declaration
DIP Financing Motion / Declaration
First Day Hearing Agenda
According to the company’s press release, the chapter 11 filing will allow WOM to reorganize its capital structure and address short-term liquidity needs in the face of a “difficult credit market environment.” The release underscores that the filing will not result in the “liquidation” of the company. CEO Chris Bannister says the chapter 11 process will allow the debtors to work with creditors and access new sources of funding to “ensure the financial stability of the company.”
The debtors’ chief restructuring officer, Robert Wagstaff, states in his first day declaration that the bankruptcy filing was predicated by liquidity challenges for the past year caused by downgrades on certain of its U.S. dollar-denominated notes and ongoing litigation with the Chilean government related to delays in the buildout of WOM’s 5G projects.
Wagstaff’s declaration emphasizes that “the most pressing issue for the Debtors is the outstanding trade and ordinary course operating payables for which immediate liquidity is essential,” explaining that a significant number of vendors and service providers have no ties to the United States and may commence enforcement actions or otherwise disrupt the debtors’ operations. The declaration details that as of the petition date, certain of the company’s Chilean unpaid creditors have initiated at least six ongoing executive proceedings and made at least two attempts to force the debtors into liquidation proceedings in Chile.
As Reorg previously reported, the company recently faced an involuntary liquidation from financial services provider Siete Cumbres Factoring. The creditor withdrew its request in mid-March.
On this basis, Wagstaff says it is “imperative” for the debtors to pay the trade creditors to stabilize operations and allow them to focus on “restructuring efforts, implement operational improvements, [and] address the ongoing disputes with the Chilean government in connection with the 5G Project.” Approximately $103.41 million of the proposed DIP financing would fund payments to critical foreign vendors and service providers, while up to $40 million would go to the securitization facility paydown. The debtors also filed a motion to affirm the Bankruptcy Code’s worldwide automatic stay in furtherance of this objective.
The declaration details the numerous liquidity constraints leading to the company exploring various out-of-court financing options, which were ultimately unsuccessful, resulting in the company focusing on in-court options to secure necessary funding. To stabilize the company, the debtors entered into a DIP financing facility with JPMorgan Chase Bank as DIP agent and TMF Group New York as collateral agent, consisting of a multidraw term loan facility in the aggregate principal amount of up to $210 million, of which $100 million would be available upon entry of the interim DIP order and satisfaction of the other conditions precedent in the DIP facility.
An ad hoc group of WOM bondholders, which, as reported by Reorg, are holders of the company’s senior notes and represented by Dechert and Ducera, also submitted a DIP financing proposal, according to the DIP financing motion. The debtors’ cleansing materials and motion to terminate nondisclosure agreements includes a redline reflecting the debtors’ counteroffer to the noteholders’ Tuesday, March 26, financing proposal.
The redline reflects an increase of the DIP facility to $200 million from $175 million and an increase in the interim draw to $90 million from $70 million. The debtors proposed a 12% interest rate, a 3% commitment fee, a 2% unused commitment fee and a 2% extension fee. The debtors also proposed to strike the noteholders’ proposed events of default, repayment and prepayment provisions, certain covenants and milestones that would “restrict and impose time limitations” on the restructuring, and other modifications.
The discussions with the noteholders also included a potential exchange offer for the company’s 2024 and 2028 notes. In conjunction with a potential $92.5 million bridge financing, the 2024 notes would have been exchanged at par and the 2028 notes exchanged at 80% for new exchanged notes. Under the proposal, the participation of the 2028 notes would be capped at 50.01%. The exchange offer had minimum participation thresholds of 90% for the 2024 notes and 50% for the 2028 notes.
The debtors elected to move forward with the JPMorgan financing proposal, saying the JPMorgan DIP is “uncontroversial” given that “it does not include priming liens, roll-ups of prepetition debt, case milestones, or any other features warranting additional scrutiny” (emphasis added). As noted, proceeds of the DIP facility would be used to pay critical vendors, provide working capital and repay in full the debtors’ secured prepetition EF securitization facility (up to $40 million). Reorg’s analysis of the DIP budget is available HERE.
According to the first day declaration, as of the petition date, the debtors have approximately $679 million of funded debt obligations, 95% of which is unsecured, and “other third party obligations” including $450 million of 6.875% senior notes due 2024 and $450 million of 4.7% senior notes due 2028.
The first day hearing is scheduled for tomorrow, Tuesday, April 2, at 11 a.m. ET.
The company’s prepetition capital structure is presented below:
The case has been assigned to Judge Karen B. Owens (case No. 23-10628). The debtors are represented by White & Case as general bankruptcy counsel, Richards Layton & Finger as local bankruptcy counsel, and Riveron Consulting and Rothschild & Co. as co-restructuring and financial advisors. Kroll Restructuring Administration is the noticing and claims agent.
Background / Events Leading to Bankruptcy Filing
The company attributes the bankruptcy filing to liquidity challenges stemming from downgrades to the company’s bonds, delays in the company’s 5G network buildout and an “uncertain path” to refinancing the company’s 2024 notes before their November maturity.
Wagstaff says the liquidity problems began when Fitch downgraded the company’s 2024 and 2028 notes to B+RR4 from BB- with a negative ratings outlook in March 2023. Wagstaff says the downgrade triggered a margin call on the company’s Chilean Peso-USD derivative contracts, resulting in a cash draw of $35 million to close out hedged positions. The downgrade also caused Inter-American Development Bank, or IDB, to reduce the company’s credit facility to $50 million from $100 million, depriving WOM of its ability to finance customer receivables. After a second downgrade of the company’s bonds last November, IDB closed the credit facility, which caused the company to commit $35 million to pay down the remaining balance to IDB.
According to the first day declaration, the company has been engaged in an international arbitration proceeding with the Chilean government regarding cellular tower construction. WOM’s inability to build the towers at an expected pace has deprived the company of $25 million of liquidity under a sale-leaseback agreement with Phoenix Tower International, or PTI. The agreement with PTI covers 3,800 towers, and the declaration says that WOM sold 2,597 towers in 2022 for $670 million. Some $385 million of these proceeds were distributed to company shareholders, and $285 million was used to repay debt and fund operations.
Prior to commencing the chapter 11 cases, Wagstaff says, the company engaged in liquidity management exercises, extending supplier payment terms and reducing payroll and other operational costs. The company unsuccessfully attempted to raise capital to refinance the 2024 notes and launched the financing process that resulted in the bankruptcy filing in March, after it determined the out-of-court proposals were not actionable in the necessary time frame or “imposed unacceptable conditions to funding.”
Wagstaff says the proposed DIP financing would allow WOM to make payments to employees, foreign and third-party vendors, and taxing authorities, among others, who provide the essential services or authorizations needed to operate the business. The debtors note that many of these parties have no ties to the United States, and, consequently, there is no assurance the parties will respect the bankruptcy court’s orders or the automatic stay.
Wagstaff reviews that WOM acquired Nextel Chile in 2015 after the Chilean government implemented a national plan to improve the country’s wireless infrastructure. WOM quickly expanded from “virtually no market share” to becoming Chile’s second-largest mobile network operator. The company said that as of December 2023, it had 8.5 million customers with 31% of “port-in market share across pre- and post-paid customers.” Wagstaff says WOM has the largest 5G coverage area and the fastest mobile network in Chile. According to the declaration, WOM holds about 25.8% of all spectrum for mobile services in Chile across 3G, 4G and 5G networks, and provides 4G coverage to 99% of Chile through national roaming agreements with other mobile providers. The company’s 5G network has about 1 million customers and a coverage area that includes 18 million people.
The company holds government concessions to operate its fiber optic and 5G networks, Wagstaff says. The declaration says that WOM was awarded five of six macro zones in a 2021 5G spectrum auction. As a result of permitting delays, pandemic-related delays and social unrest, Wagstaff says, WOM had completed 80% of its buildout targets by an October 2023 deadline for three of the five zones. He says the Chilean government has “disputed the justifications for the non-completed portion of the project,” WOM has taken legal action to preserve its rights, and the parties “continue to discuss alternatives to overcome this dispute.”
Wagstaff says that the Subsecretaría de Telecomunicaciones de Chile, or SUBTEL, denied the company’s requests for deadline extensions and “threatened” to call performance bonds issued in connection with the project in October 2023. The dispute is pending before the International Center for Settlement of Investment Disputes.
The debtors’ largest unsecured creditors are as follows:
The case representatives are as follows:
Organizational Chart
DIP Financing Motion (Credit Agreement)
The proposed $210 million DIP facility would be used to repay the EF securitization facility and critical vendors, as well as for general corporate purposes and to fund the bankruptcy proceedings. The debtors would have access to $100 million of the DIP loans upon entry of the interim DIP order, with $40 million of the initial draw to be used to repay the EF securitization facility in full.
The proposed budget for the use of the DIP facility is HERE.
The DIP financing bears interest at 10%, with an additional 2% as the default rate, and matures on the earlier of (i) July 1, 2025 (subject to a 90-day extension); (ii) the plan effective date; (iii) the consummation of a sale of substantially all assets; (iv) conversion of the cases to chapter 7; or (v) termination of the facility, including a failure to meet the agreed timeline for final DIP approval.
To secure the DIP financing, the debtors propose to grant a first lien on all previously unencumbered property, including the proceeds of avoidance actions (subject to a final order); second liens on the collateral securing permitted prior liens, and all the debtors’ cash. The unencumbered property includes: (i) all equity interests; (ii) all intellectual property; (iii) intercompany loans, (iv) intercompany loans, (v) real property, (vi) WOM’s fiber optic infrastructure, hardware networks and installed optical network terminals or routers; and (iv) the economic value of, and any proceeds of the sale of, any concessions or similar permits or licenses held by WOM. After repayment of the EF securitization facility, the DIP collateral would include all receivables and proceeds thereof, as well as any other assets subject to the liens under the EF securitization facility.
The DIP credit agreement has a $25 million minimum liquidity covenant, and a negative pledge covenant with respect to WOM’s spectrum assets.
The facility does not include any priming liens, rollups of prepetition debt or case milestones.
The facility includes: (i) a 1% exit fee; (ii) a 3% unused commitment fee; (iii) a 1% maturity extension fee; and (iv) $6.4 million of other fees as set forth in a confidential fee letter. The agreement also provides for the payment of the professional fees and expenses of the DIP agent.
In addition, subject to entry of a final order, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the marshaling doctrine.
The post-termination carve-out for professional fees is $3 million.
The DIP financing does not have any listed milestones, but the facility automatically matures on May 16 (45 calendar days from the petition date) if the DIP facility has not been approved on a final basis.
There is no timing or restriction to challenge prepetition liens. No DIP proceeds may be used to investigate or challenge the DIP liens.
Rothschild managing director Marcelo Messer submitted a declaration in support of the DIP financing. Messer reviews the five DIP financing proposals the debtors received during the last two weeks of March, including a proposal submitted by a Dechert-represented ad hoc group of bondholders and two proposals from other lender groups. After considering the terms of the financing, as well as the ability of the lenders to “work cooperatively,” with the debtors, Messer says the JPM proposal was the “highest and best” proposal.
Messer also notes that the proposed use of the DIP facility to repay critical non-U.S. creditors that may dispute whether they are subject to the automatic stay is critical to the restructuring. Absent these payments, he says, these creditors could pursue actions in Chile that could either require them to be paid in full or require the debtors to commence a separate insolvency proceeding in Chile. If such Chilean proceedings were commenced, Messer says, the debtors would be unable to receive the “same level” of financing as currently proposed and “would thus be unable to stabilize their operations.”
Cleansing Materials (March DIP Presentation and Restricted Bondholder Presentation)
WOM includes the following historical and projected finances and other information used in its confidential discussions with noteholders regarding the alternative DIP financing.
Post-Financing Exchange Offer
Illustrative Model Financial Projections
DIP Proposal Financial Projections
Historical Balance Sheet and Financials
Consolidated Income Statement
Cash Flow Statement
Overview of Unencumbered Accounts Receivable
Other Motions
The debtors also filed various standard first day motions, including the following:
Voluntary Petition
Press Release
First Day Declaration
DIP Financing Motion / Declaration
First Day Hearing Agenda
| Summary |
| WOM SA, a Chilean telecommunications provider, filed for bankruptcy to implement a balance sheet restructuring, though it has no ‘definitive restructuring solution’ in place |
| Prepetition negotiations with noteholders included alternative DIP proposals and a potential exchange offer |
| $210 million DIP financing from JPMorgan would stabilize operations, pay down a prepetition securitization facility and stave off Chilean insolvency proceedings by paying foreign critical vendors and service providers |
Chilean mobile and broadband telecommunications provider WOM SA, fka Nextel Chile SA, and several affiliates filed chapter 11 petitions today in the U.S. Bankruptcy Court for the District of Delaware, reporting $1 billion to $10 billion in both assets and liabilities. The debtors enter chapter 11 with a $210 million DIP financing commitment, which would be used to repay the debtors’ prepetition securitization facility and critical vendors. Although negotiations with stakeholders on a “definitive restructuring solution” are underway, the debtors lack a conclusive reorganization plan.
According to the company’s press release, the chapter 11 filing will allow WOM to reorganize its capital structure and address short-term liquidity needs in the face of a “difficult credit market environment.” The release underscores that the filing will not result in the “liquidation” of the company. CEO Chris Bannister says the chapter 11 process will allow the debtors to work with creditors and access new sources of funding to “ensure the financial stability of the company.”
The debtors’ chief restructuring officer, Robert Wagstaff, states in his first day declaration that the bankruptcy filing was predicated by liquidity challenges for the past year caused by downgrades on certain of its U.S. dollar-denominated notes and ongoing litigation with the Chilean government related to delays in the buildout of WOM’s 5G projects.
Wagstaff’s declaration emphasizes that “the most pressing issue for the Debtors is the outstanding trade and ordinary course operating payables for which immediate liquidity is essential,” explaining that a significant number of vendors and service providers have no ties to the United States and may commence enforcement actions or otherwise disrupt the debtors’ operations. The declaration details that as of the petition date, certain of the company’s Chilean unpaid creditors have initiated at least six ongoing executive proceedings and made at least two attempts to force the debtors into liquidation proceedings in Chile.
As Reorg previously reported, the company recently faced an involuntary liquidation from financial services provider Siete Cumbres Factoring. The creditor withdrew its request in mid-March.
On this basis, Wagstaff says it is “imperative” for the debtors to pay the trade creditors to stabilize operations and allow them to focus on “restructuring efforts, implement operational improvements, [and] address the ongoing disputes with the Chilean government in connection with the 5G Project.” Approximately $103.41 million of the proposed DIP financing would fund payments to critical foreign vendors and service providers, while up to $40 million would go to the securitization facility paydown. The debtors also filed a motion to affirm the Bankruptcy Code’s worldwide automatic stay in furtherance of this objective.
The declaration details the numerous liquidity constraints leading to the company exploring various out-of-court financing options, which were ultimately unsuccessful, resulting in the company focusing on in-court options to secure necessary funding. To stabilize the company, the debtors entered into a DIP financing facility with JPMorgan Chase Bank as DIP agent and TMF Group New York as collateral agent, consisting of a multidraw term loan facility in the aggregate principal amount of up to $210 million, of which $100 million would be available upon entry of the interim DIP order and satisfaction of the other conditions precedent in the DIP facility.
An ad hoc group of WOM bondholders, which, as reported by Reorg, are holders of the company’s senior notes and represented by Dechert and Ducera, also submitted a DIP financing proposal, according to the DIP financing motion. The debtors’ cleansing materials and motion to terminate nondisclosure agreements includes a redline reflecting the debtors’ counteroffer to the noteholders’ Tuesday, March 26, financing proposal.
The redline reflects an increase of the DIP facility to $200 million from $175 million and an increase in the interim draw to $90 million from $70 million. The debtors proposed a 12% interest rate, a 3% commitment fee, a 2% unused commitment fee and a 2% extension fee. The debtors also proposed to strike the noteholders’ proposed events of default, repayment and prepayment provisions, certain covenants and milestones that would “restrict and impose time limitations” on the restructuring, and other modifications.
The discussions with the noteholders also included a potential exchange offer for the company’s 2024 and 2028 notes. In conjunction with a potential $92.5 million bridge financing, the 2024 notes would have been exchanged at par and the 2028 notes exchanged at 80% for new exchanged notes. Under the proposal, the participation of the 2028 notes would be capped at 50.01%. The exchange offer had minimum participation thresholds of 90% for the 2024 notes and 50% for the 2028 notes.
The debtors elected to move forward with the JPMorgan financing proposal, saying the JPMorgan DIP is “uncontroversial” given that “it does not include priming liens, roll-ups of prepetition debt, case milestones, or any other features warranting additional scrutiny” (emphasis added). As noted, proceeds of the DIP facility would be used to pay critical vendors, provide working capital and repay in full the debtors’ secured prepetition EF securitization facility (up to $40 million). Reorg’s analysis of the DIP budget is available HERE.
According to the first day declaration, as of the petition date, the debtors have approximately $679 million of funded debt obligations, 95% of which is unsecured, and “other third party obligations” including $450 million of 6.875% senior notes due 2024 and $450 million of 4.7% senior notes due 2028.
The first day hearing is scheduled for tomorrow, Tuesday, April 2, at 11 a.m. ET.
The company’s prepetition capital structure is presented below:
The case has been assigned to Judge Karen B. Owens (case No. 23-10628). The debtors are represented by White & Case as general bankruptcy counsel, Richards Layton & Finger as local bankruptcy counsel, and Riveron Consulting and Rothschild & Co. as co-restructuring and financial advisors. Kroll Restructuring Administration is the noticing and claims agent.
Background / Events Leading to Bankruptcy Filing
The company attributes the bankruptcy filing to liquidity challenges stemming from downgrades to the company’s bonds, delays in the company’s 5G network buildout and an “uncertain path” to refinancing the company’s 2024 notes before their November maturity.
Wagstaff says the liquidity problems began when Fitch downgraded the company’s 2024 and 2028 notes to B+RR4 from BB- with a negative ratings outlook in March 2023. Wagstaff says the downgrade triggered a margin call on the company’s Chilean Peso-USD derivative contracts, resulting in a cash draw of $35 million to close out hedged positions. The downgrade also caused Inter-American Development Bank, or IDB, to reduce the company’s credit facility to $50 million from $100 million, depriving WOM of its ability to finance customer receivables. After a second downgrade of the company’s bonds last November, IDB closed the credit facility, which caused the company to commit $35 million to pay down the remaining balance to IDB.
According to the first day declaration, the company has been engaged in an international arbitration proceeding with the Chilean government regarding cellular tower construction. WOM’s inability to build the towers at an expected pace has deprived the company of $25 million of liquidity under a sale-leaseback agreement with Phoenix Tower International, or PTI. The agreement with PTI covers 3,800 towers, and the declaration says that WOM sold 2,597 towers in 2022 for $670 million. Some $385 million of these proceeds were distributed to company shareholders, and $285 million was used to repay debt and fund operations.
Prior to commencing the chapter 11 cases, Wagstaff says, the company engaged in liquidity management exercises, extending supplier payment terms and reducing payroll and other operational costs. The company unsuccessfully attempted to raise capital to refinance the 2024 notes and launched the financing process that resulted in the bankruptcy filing in March, after it determined the out-of-court proposals were not actionable in the necessary time frame or “imposed unacceptable conditions to funding.”
Wagstaff says the proposed DIP financing would allow WOM to make payments to employees, foreign and third-party vendors, and taxing authorities, among others, who provide the essential services or authorizations needed to operate the business. The debtors note that many of these parties have no ties to the United States, and, consequently, there is no assurance the parties will respect the bankruptcy court’s orders or the automatic stay.
Wagstaff reviews that WOM acquired Nextel Chile in 2015 after the Chilean government implemented a national plan to improve the country’s wireless infrastructure. WOM quickly expanded from “virtually no market share” to becoming Chile’s second-largest mobile network operator. The company said that as of December 2023, it had 8.5 million customers with 31% of “port-in market share across pre- and post-paid customers.” Wagstaff says WOM has the largest 5G coverage area and the fastest mobile network in Chile. According to the declaration, WOM holds about 25.8% of all spectrum for mobile services in Chile across 3G, 4G and 5G networks, and provides 4G coverage to 99% of Chile through national roaming agreements with other mobile providers. The company’s 5G network has about 1 million customers and a coverage area that includes 18 million people.
The company holds government concessions to operate its fiber optic and 5G networks, Wagstaff says. The declaration says that WOM was awarded five of six macro zones in a 2021 5G spectrum auction. As a result of permitting delays, pandemic-related delays and social unrest, Wagstaff says, WOM had completed 80% of its buildout targets by an October 2023 deadline for three of the five zones. He says the Chilean government has “disputed the justifications for the non-completed portion of the project,” WOM has taken legal action to preserve its rights, and the parties “continue to discuss alternatives to overcome this dispute.”
Wagstaff says that the Subsecretaría de Telecomunicaciones de Chile, or SUBTEL, denied the company’s requests for deadline extensions and “threatened” to call performance bonds issued in connection with the project in October 2023. The dispute is pending before the International Center for Settlement of Investment Disputes.
The debtors’ largest unsecured creditors are as follows:
| 10 Largest Unsecured Creditors | |||
| Creditor | Location | Claim Type | Amount |
|---|---|---|---|
| U.S. Bank Wealth Management |
Boston | 2024 Unsecured Bonds |
$ 356,237,762 |
| U.S. Bank Wealth Management |
Boston | 2028 Unsecured Bonds |
292,574,556 |
| BCI Factoring SA | Santiago, Chile | Trade | 44,609,370 |
| China Construction Bank Corp. |
Shenzhen, China | Trade | 29,127,451 |
| Phoenix Tower International Chile SPA |
Santiago, Chile | Trade | 25,920,139 |
| Xiaomi Chile SPA | Santiago, Chile | Trade | 16,453,605 |
| Motorola Mobility LLC | Libertyville, Ill. | Trade | 14,651,915 |
| Mirgor Chile SPA | Santiago, Chile | Trade | 11,163,267 |
| Industrial and Commercial Bank of China |
Shenzhen, China | Trade | 10,948,568 |
| Bank of China (Hong Kong) Ltd. |
Hong Kong | Trade | 10,911,648 |
The case representatives are as follows:
| Representatives | |||
| Role | Name | Firm | Location |
|---|---|---|---|
| Debtors' Co-Counsel |
Philip M. Abelson Andrew Zatz Samuel P. Hershey Andrea Amulic Lilian Marques Claire Tuffey |
White & Case | New York |
| John K. Cunningham Richard S. Kebrdle |
Miami | ||
| Debtors' Co-Counsel |
John H. Knight Amanda R. Steele Brendan J. Schlauch |
Richards, Layton & Finger |
Wilmington, Del. |
| Debtors' Restructuring Advisor and CRO |
Robert Wagstaff | Riveron | Miami |
| Debtors' Investment Banker |
Marcelo Messer | Rothschild | New York |
| Co-Counsel to JPMorgan Chase Bank as DIP Agent |
James Ktsanes | Latham & Watkins |
Chicago |
| Andrew Sorkin | Washington | ||
| Jeffrey T. Mispagel Amy Quartarolo |
Los Angeles | ||
| Co-Counsel to JPMorgan Chase Bank as DIP Agent |
Jeremy W. Ryan Brett M. Haywood |
Potter Anderson & Corroon |
Wilmington, Del. |
| Counsel to Ad Hoc Group of WOM Bondholders |
NA | Dechert | NA |
| U.S. Trustee | NA | Office of the U.S. Trustee |
Wilmington, Del. |
| Debtors’ Claims Agent |
Benjamin J. Steele | Kroll | New York |
Organizational Chart
(Click HERE to enlarge.)
DIP Financing Motion (Credit Agreement)
The proposed $210 million DIP facility would be used to repay the EF securitization facility and critical vendors, as well as for general corporate purposes and to fund the bankruptcy proceedings. The debtors would have access to $100 million of the DIP loans upon entry of the interim DIP order, with $40 million of the initial draw to be used to repay the EF securitization facility in full.
The proposed budget for the use of the DIP facility is HERE.
The DIP financing bears interest at 10%, with an additional 2% as the default rate, and matures on the earlier of (i) July 1, 2025 (subject to a 90-day extension); (ii) the plan effective date; (iii) the consummation of a sale of substantially all assets; (iv) conversion of the cases to chapter 7; or (v) termination of the facility, including a failure to meet the agreed timeline for final DIP approval.
To secure the DIP financing, the debtors propose to grant a first lien on all previously unencumbered property, including the proceeds of avoidance actions (subject to a final order); second liens on the collateral securing permitted prior liens, and all the debtors’ cash. The unencumbered property includes: (i) all equity interests; (ii) all intellectual property; (iii) intercompany loans, (iv) intercompany loans, (v) real property, (vi) WOM’s fiber optic infrastructure, hardware networks and installed optical network terminals or routers; and (iv) the economic value of, and any proceeds of the sale of, any concessions or similar permits or licenses held by WOM. After repayment of the EF securitization facility, the DIP collateral would include all receivables and proceeds thereof, as well as any other assets subject to the liens under the EF securitization facility.
The DIP credit agreement has a $25 million minimum liquidity covenant, and a negative pledge covenant with respect to WOM’s spectrum assets.
The facility does not include any priming liens, rollups of prepetition debt or case milestones.
The facility includes: (i) a 1% exit fee; (ii) a 3% unused commitment fee; (iii) a 1% maturity extension fee; and (iv) $6.4 million of other fees as set forth in a confidential fee letter. The agreement also provides for the payment of the professional fees and expenses of the DIP agent.
In addition, subject to entry of a final order, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the marshaling doctrine.
The post-termination carve-out for professional fees is $3 million.
The DIP financing does not have any listed milestones, but the facility automatically matures on May 16 (45 calendar days from the petition date) if the DIP facility has not been approved on a final basis.
There is no timing or restriction to challenge prepetition liens. No DIP proceeds may be used to investigate or challenge the DIP liens.
Rothschild managing director Marcelo Messer submitted a declaration in support of the DIP financing. Messer reviews the five DIP financing proposals the debtors received during the last two weeks of March, including a proposal submitted by a Dechert-represented ad hoc group of bondholders and two proposals from other lender groups. After considering the terms of the financing, as well as the ability of the lenders to “work cooperatively,” with the debtors, Messer says the JPM proposal was the “highest and best” proposal.
Messer also notes that the proposed use of the DIP facility to repay critical non-U.S. creditors that may dispute whether they are subject to the automatic stay is critical to the restructuring. Absent these payments, he says, these creditors could pursue actions in Chile that could either require them to be paid in full or require the debtors to commence a separate insolvency proceeding in Chile. If such Chilean proceedings were commenced, Messer says, the debtors would be unable to receive the “same level” of financing as currently proposed and “would thus be unable to stabilize their operations.”
Cleansing Materials (March DIP Presentation and Restricted Bondholder Presentation)
WOM includes the following historical and projected finances and other information used in its confidential discussions with noteholders regarding the alternative DIP financing.
Post-Financing Exchange Offer
Illustrative Model Financial Projections
DIP Proposal Financial Projections
Historical Balance Sheet and Financials
Consolidated Income Statement
Cash Flow Statement
Overview of Unencumbered Accounts Receivable
Other Motions
The debtors also filed various standard first day motions, including the following:
- Motion for joint administration
- Motion to pay employee wages and benefits
- The motion seeks authorization to pay approximately $9.4 million of unpaid prepetition employee obligations on an interim basis and $11.4 million on a final basis.
- Motion to use cash management system
- The company has 45 bank accounts, consisting of 27 bank accounts in Chile, 11 bank accounts in the U.S., three bank accounts in Cyprus, three bank accounts in Luxembourg and one bank account in China. The debtors have banking relationships with Santander, Banco Estado, Banco de Chile, Banco BCI, Scotiabank, BTG Pactual, Banco Internacional, Banco Itau, Banco Consorcio, JPMorgan Chase Bank NA, Bank of America, U.S. Bank NA, M&T Bank, HSBC, China Development Bank, Citibank Europe plc and Bank of Cyprus Public Co. Ltd.
- Motion to maintain insurance and surety bond programs
- The motion seeks authorization to make payments to maintain the debtors’ insurance programs and surety bond obligations. Payments would not exceed $100,000 on an interim basis.
- Motion to pay taxes and fees
- The motion seeks authorization to pay approximately $8.2 million of taxes and fees on an interim basis and $37.5 million on a final basis.
- Motion for authority to redact personal identification information
- The motion seeks authorization to redact the personally identifiable information of any individuals who are protected by Chilean data privacy laws and other foreign laws.
- Motion for an order confirming, restating and enforcing the automatic stay and nondiscrimination provisions of the Bankruptcy Code
- Motion for authority to pay foreign vendor claims and to continue customer programs
- The motion seeks authorization to pay foreign utility providers ($2.16 million payable during the interim period), factoring services providers ($6.29 million payable during the interim period) and other business vendors ($32.86 million payable during the interim period). The debtors request authority to pay approximately $41.36 million on an interim basis and $103.41 million on a final basis, as the obligations come due in the ordinary course of business.
- The debtors also request authority to pay their interconnection and shipping services providers in the ordinary courts of business.
- Finally, the debtors ask to pay customer refund claims, as well as to continue their customer discount, financing, upgrade and other customer programs.
- Notice of termination of nondisclosure agreements and disclosure of certain confidential information
- Application to appoint Kroll as claims agent
Editor’s Note: The story has been clarified to reflect that the maturity date of the DIP facility is July 1, 2025.
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