Bankrupt entertainment production logistics company VER Technologies HoldCo LLC received interim court approval Friday in Delaware for access to $48 million of its $364 million debtor-in-possession financing as it pursues a merger deal with a competitor.
During a first-day hearing in Wilmington, VER attorney Travis Bayer of Kirkland & Ellis LLP described a dual-tranche post-petition finance package that would see existing prepetition lenders provide the DIP funding to allow the debtor to move swiftly through the Chapter 11 process.
“We believe we’ve captured the most favorable deal that we could. This DIP is sufficiently sized to carry us through to a plan,” Bayer said.
Existing first-lien asset-based loan providers owed $300 million will contribute that amount when the DIP is approved on a final basis, which will roll-up to satisfy that prepetition debt, Bayer said. Prepetition second-lien term loan lenders will provide $64.7 million in DIP funding, with $48 million available on an interim basis. About $15 million of the term loan DIP will roll-up to satisfy some of the $425 million in existing term loan debt.
The funding is needed to continue operations through the pendency of the case as the debtors had less than $5 million in cash on hand at the time of their Chapter 11 petition filing Thursday, Bayer said.
The post-petition ABL facility will enjoy superpriority status, while the DIP term lending will come with priming liens topping other creditors, Bayer said. The lenders also requested the DIP orders require case milestones, including a plan confirmation deadline within 100 days of the case commencement date.
Prior to the hearing, VER resolved comments from the United States trustee over the ABL roll-up by agreeing to make the roll-up subject to a challenge period and potential clawback if the ABL secured liens are successfully challenged.
U.S. Bankruptcy Judge Kevin Gross agreed to grant interim approval, saying it was the result of a prepetition negotiation process that resulted in acceptable terms.
“I do find there is very much a need for the financing and the terms are fair, reasonable and within the debtors’ business judgment,” Judge Gross said.
A final hearing on the DIP and other interim relief is scheduled for May 4 at 1:30 p.m. before Judge Gross in Wilmington.
The court also granted other first-day motions Friday, including a request to pay employee wages and benefits and to make payments to critical domestic and foreign vendors.
VER is a leading provider of equipment rentals and services in the entertainment industry, supplying video, audio and lighting systems to clients in the film and music sectors, as well as for corporate events, according to debtor attorney Ryan Blaine Bennett of Kirkland & Ellis LLP.
The company provided services to the halftime show at Super Bowl 52 in February featuring Justin Timberlake, including specialized equipment and more than 100 employees, Bennett said. VER has more than 350 clients worldwide, including live concert and music festival organizers.
A run of expansion in recent years stressed its prepetition credit facilities and its liquidity was constrained as a result, he said. The company began exploring strategic option last year and reached a restructuring support agreement with its secured lenders and merger partner Production Resource Group LLC. Under the terms of the RSA, VER’s term loan lenders will swap their debt for the equity of the reorganized company, which will merge with PRG at the end of the case, Bennett said.
The debtors are represented by Domenic E. Pacitti and Morton Branzburg of Klehr Harrison Harvey Branzburg LLP, and Joshua A. Sussberg, Cristine Pirro, James H.M. Sprayregen and Ryan Blaine Bennett of Kirkland & Ellis LLP.
The US trustee is represented by David Buchbinder.
The case is In re: VER Technologies HoldCo LLC, case number 18-bk-10834, in the U.S. Bankruptcy Court for the District of Delaware.
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