Waypoint Leasing Upsizes DIP Facility to $49M From $45M, Obtains First Day Relief; Second Day and Bid Procedures Hearing Set for Dec. 20

Relevant Documents:
Hearing Agenda
Bid Procedures Motion

Judge Stuart Bernstein granted the Waypoint Leasing debtors’ requested first day relief at a hearing in New York this afternoon, including interim approval of $30 million of the debtors’ $49 million debtor-in-possession facility.

At the hearing, Kelly DiBlasi of Weil Gotshal announced an increase in the size of the DIP, up slightly to $49 million from the originally proposed $45 million. The increase was the result of a recent agreement of one of the previously nonparticipating WAC facilities, WAC 3, to participate in the DIP facility. DiBlasi informed the court that WAC 3, along with the two remaining nonparticipating WAC facilities, have each consented to the debtors’ use of their respective cash collateral. Aside from the increased total DIP facility amount and revisions to the DIP budget, all other terms for the DIP facility will remain the same, said DiBlasi.

At the outset of today’s hearing, Gary T. Holtzer of Weil Gotshal thanked the court for adjourning the first day hearing, adding that the additional time gave the debtors an opportunity to resolve all of the objections to the first day relief and enabled them to file their DIP financing motion over the weekend. In particular, Holtzer highlighted that even though the debtors’ proposed DIP financing and cash collateral arrangements are “complex,” no parties had objected to interim DIP approval. Later in the hearing, the debtors disclosed that Lombard’s objection to the cash management motion had been resolved.

The Ireland-based helicopter leasing company and 142 of its affiliates filed for chapter 11 on Nov. 25, with plans to use the bankruptcy process to facilitate a sale of substantially all of Waypoint’s assets to a new owner. Waypoint announced on Dec. 8 that it entered into a definitive agreement to sell its assets to Macquarie Group as a going concern for approximately $650 million. The $650 million in consideration offered by Macquarie includes cash consideration plus the assumption of certain liabilities, subject to adjustments. Macquarie has agreed to purchase the debtors’ core and noncore aircraft (approximately 160 aircraft) and to assume certain executory contracts, unexpired leases and related liabilities.

Shortly before today’s first day hearing, the debtors filed a motion for approval of bid procedures in connection with their proposed sale to Macquarie. The debtors “intend to implement a streamlined sale process that contemplates an auction only in the event that the Debtors receive a cash bid from third parties,” according to the bid procedures motion. The debtors propose reimbursing Macquarie up to a cap of $3 million for any costs and expenses incurred in connection with the transactions contemplated by the Macquarie APA. Additionally, the debtors propose a breakup fee in an amount equal to 3% of the base purchase price, or $19.5 million. The bid procedures motion is described further below.

Holtzer, DiBlasi, Gaby Smith and John Conte of Weil Gotshal spoke on behalf of the debtors at today’s hearing.

The second day and bid procedures hearing, which will also serve as a further interim DIP hearing, is scheduled for Dec. 20 at 10 a.m. ET. The final DIP hearing has not yet been set.

Below are highlights from today’s first day hearing and an overview of the debtors’ bid procedures motion.

First Day Hearing Highlights

In introducing the cases, Holtzer stressed that the debtors are the largest independent helicopter leasing company in the world, with 164 owned helicopters, 36 lessee customers in 34 countries and 42 full-time employees. The debtors have approximately $1.1 billion in outstanding funded debt obligations under nine separate debt facilities that consist of two secured revolving credit facilities (WAC 1 and WAC 7), six secured term loans (WAC 2, 3, 6, 9, 10 and 12) and one secured notes facility (WAC 8). Additionally, the debtors have approximately $9 million of general unsecured claims, “and we believe that a significant amount of that debt will be paid” either as the result of the assumption of contracts throughout the bankruptcy process or as a result of the first day relief, said Holtzer. Separately, Holtzer noted that the debtors have 12 nondebtor affiliates that are primarily service companies and that employ 10 of the company’s employees around the world.

Holtzer briefly discussed the debtors’ proposed sale process, which he characterized as involving a “fairly elaborate credit bidding arrangement.” He added that the proposed DIP facility would provide the debtors with sufficient liquidity for the sale and the remainder of the chapter 11 process.

Later in the hearing, DiBlasi for the debtors remarked that the debtors’ proposed DIP financing “is a complicated DIP that’s getting layered on top of an already complicated capital structure.” DiBlasi stressed that the DIP facility is the result of extensive good faith and arm’s-length negotiations. The milestones contemplated under the DIP financing provide “more than enough time” for the company to pursue a going-concern sale, argued DiBlasi.

Tyson Lomazow of Milbank Tweed, counsel to the steering committee of lenders, spoke briefly to express support for interim DIP approval. Lomazow asserted that the proposed DIP facility “embodies a compromise among all the participating WAC facilities” with respect to the provision of financing and the use of cash collateral. He noted that the steering committee was formed in mid-June with the initial aim to facilitate discussions between the company and its lenders regarding the terms of a potential forbearance agreement, which would be consistent over all of the nine WAC facilities. Since then, the steering committee’s role has been to identify and pursue “common objectives” for the company’s various lenders and to facilitate a process for approaching the company’s restructuring in a coordinated and efficient manner, said Lomazow.

After the court and the debtors discussed the revised proposed interim DIP order, Judge Bernstein approved the DIP financing on an interim basis, subject to the debtors’ incorporation of certain modifications requested by the court. Judge Bernstein noted that in connection with several of his requested changes, his primary problem with the debtors’ proposed interim order was that they were asking for a substantial amount of relief after providing “virtually no notice” given that the DIP motion was filed over the weekend. The court made clear that there would be no issue approving a “simple order” with the understanding that certain items or issues could be carried over to the final DIP order.

The debtors intend to submit a further revised interim DIP order incorporating the court’s requested changes by tomorrow, Tuesday, Dec. 11.

Judge Bernstein also approved the debtors’ other first day motions, including the employee wages, customer deposit, taxes, automatic stay enforcement and lien claimants motions.

Bid Procedures Motion

The debtors note that as part of their M&A process, they solicited bids from over 180 strategic and financial investors as well as sovereign wealth funds, received 14 initial qualifying bids as part of the first round, selected nine bidders to proceed to a second round of negotiations and received six final bids, according to the motion. The debtors ultimately chose to pursue Macquarie’s bid as the best available option.

The debtors say that their proposed bid procedures “are intended to generate the greatest level of interest in the Purchased Assets resulting in the highest or otherwise best offer” and have been formulated to maximize value for the debtors’ estates and stakeholders.

The debtors’ proposed sale timeline is as follows:
 

• Dec. 20 at 10 a.m. ET: Bid procedures hearing.
   
• Jan. 3, 2019, at 5 p.m. ET: Deadline to object to Macquarie bid.
   
• Jan. 4 at 5 p.m. ET: Deadline to submit third-party bids.
   
• Jan. 7 at 9 a.m. ET: Deadline for debtors to notify third-party bidders of status as qualified third-party bidders.
   
• Jan. 8 at 10 a.m. ET: Auction, the debtors receive qualified third-party bids.
   
• Jan. 9 at 5 p.m. ET: Deadline to file notice and identities of successful third.party bid and backup third-party bid.
   
• Jan. 14 at 5 p.m. ET: Deadline to submit credit bids and for requisite lenders to deliver an executed plan support agreement in a form and substance reasonably acceptable to the debtors and Macquarie.
   
• Jan. 16 at 5 p.m. ET: Deadline to object to successful third-party bid and cure costs.
   
• Jan. 21 at 5 p.m. ET: Deadline for successful third-party bidder to submit matching bid to qualified credit bids; if qualified credit bids are timely submitted and the debtors do not receive matching bids, deadline to file notice and identities of successful credit bids; if requisite lenders collectively hold security interests in less than 110 aircraft, deadline for requisite lenders to submit credit bids.
   
• Jan. 28 at 5 p.m. ET: If requisite lenders collectively hold security interests in less than 110 aircraft submit credit bids, deadline for successful third-party bidder to submit matching bid to requisite lender credit bid.
   
• Feb. 4 at 5 p.m. ET: If requisite lenders collectively hold security interests in 110 or more aircraft, deadline for successful third-party bidder to notify debtors of intent to pursue plan sale.
   
• Feb. 11 at 5 p.m. ET: If successful third-party bidder rejects plan sale, deadline for requisite lenders to submit requisite lender credit bids.
   
• Feb. 18 at 5 p.m. ET: Deadline for successful third-party bidder to submit matching bid to requisite lender credit bid and deadline to object to successful credit bids.
   
• Feb. 22 at 5 p.m. ET: Deadline to object to adequate assurance of future performance.

As previously reported, the debtors and the DIP lenders have also agreed to a set of bidding process milestones.

The up to $3 million expense reimbursement would be payable in the event that the Macquarie APA is terminated (i) by either Macquarie or the debtors if the debtors enter into and consummate a definitive agreement with respect to a competing bid approved by the court; (ii) by Macquarie if the purchased assets consist of 50 or fewer core aircraft due to the sale of such aircraft in accordance with the credit-bidding provisions of the Macquarie APA; (iii) by Macquarie in the event the debtors breach the Macquarie APA in a manner that causes certain of the closing conditions in the APA not to be satisfied; and (iv) by either Macquarie or the debtors if all of the debtors’ aircraft are sold pursuant to the credit-bidding provisions of the Macquarie APA.

The 3% breakup fee would be payable in the event that either Macquarie or the debtors terminate the Macquarie APA if the debtors enter into a definitive agreement with respect to a competing bid approved by the court. Additionally, if Macquarie were to terminate the APA due to a breach by the debtors in a manner that causes certain of the closing conditions in the APA not to be satisfied and one or more competing bids is consummated during the 18-month period following the termination of the Macquarie APA, the debtors would pay the pro rata portion of the breakup fee upon consummation of each such competing bid.

The proposed bid procedures also provide for initial overbid minimum and subsequent bidding increment requirements for bids submitted for the purchased assets. In the event that an auction is held and Macquarie is not the winning bidder, Macquarie has agreed to serve as the backup bidder.

In support of the bid procedures motion, the debtors filed the declaration of Matthew R. Niemann of Houlihan Lokey, the debtors’ investment banker. The debtors also filed the declaration of Weil Gotshal's Holtzer, counsel to the debtors, in support of their request for expedited consideration of the bid procedures motion.