Bankruptcy: Exide nets OK for its amended DIP at the cost of plan exclusivity

The bankruptcy court overseeing the Chapter 11 proceedings of Exide Technologies has approved an amended DIP facility for the company, but only on the condition that the company’s exclusivity period to file a reorganization plan be terminated.

In doing so, Bankruptcy Court Judge Kevin Carey practically dared the unsecured creditors’ committee in the case, which had objected to the amended DIP on the grounds that more favorable financing was available for the company, to file a competing reorganization plan.

“The committee can stop telling me there is something better,” Carey said, “and start showing me.”

Exclusivity had been set to expire on Dec. 10. It will now expire on Nov. 6, with Carey giving the company and its DIP lenders several days to gather the approvals necessary to further amend the facility so that the termination of exclusivity does not cause a default.

As reported, the unsecured creditors’ committee in the case had argued that the narrow milestone deadlines of the amended DIP were designed to ease the way for DIP lenders, many of which are also prepetition noteholders, to credit bid their claims to acquire the company’s most valuable assets by eliminating the potential for competing third-party bids.

Under the amended DIP, the facility would be extended through March 15, 2015, an extension the company said it needed because of several setbacks to its reorganization that occurred this summer. In connection with that maturity extension, the company set Nov. 17 as the deadline for it to enter into a reorganization plan support agreement with creditors, saying that if it failed to do so it would pursue a sale of the company.

The milestone deadlines associated with the sale option would require a signed stalking-horse agreement by Dec. 23, bankruptcy court approval of bid procedures by Jan. 15, 2015, and bankruptcy court approval of a sale by March 10, 2015.

That timeline, the unsecured creditor panel said, was too tight for a potential buyer to formulate a bid and perform due diligence on a company the size and complexity of Exide.

In arguing that the amended DIP was designed to benefit pre-petition noteholders, the creditors’ committee said the company had made “little or no effort” to pursue alternative DIP funding, despite the committee’s financial advisor providing the company with names of several potential alternative lenders.

At a hearing on the extended DIP this morning in Wilmington, Del., some of the potential alternative lenders were identified as Jefferies, Cerberus, PIMCO, and Black Rock. While all parties agreed that talks with those lenders did not advance too far, the creditors’ committee argued that was due to the company’s stalling tactics.

For its part, the company said that its current lender, JPMorgan Chase, was the only firm to actually provide it with a funding commitment, and in any event, any alternative DIP financing would have triggered a priming fight with prepetition noteholders. The company also argued that the most promising alternative offer, from Jefferies, was priced higher than the amended DIP, although the creditors’ committee countered that the pricing of the Jefferies offer was balanced with other, more favorable terms, including a longer maturity extension of one year and an extended, more realistic sale timeline.

Beyond the battle over the company’s negotiation of its DIP facility, the company’s key stakeholders disagreed over the company’s prospects for a reorganization plan as opposed to a sale process.

An attorney for an unofficial ad hoc committee of noteholders, for example, denied that the group’s objective was to position itself for a credit bid. “The UNC’s primary objective is a reorganization plan,” the attorney told Carey, adding that the group was involved in active negotiations with the company.

But lawyers for the official unsecured creditors’ committee said no such negotiations were taking place. “If there is a plan process going on,” the lawyer said, “it doesn’t include us.”

Against this backdrop, Carey approved the amended DIP based on a finding that the company had clearly met its burden under the Bankruptcy Code and business judgment rule for approval of the facility, but he added that the case itself “had reached a mile post” at which “the court must make a decision” on the process from this point forward.

“Fairness requires” that exclusivity be terminated, Carey said, so that the creditors’ committee, “if it wishes, can put its money where its mouth is.” – Alan Zimmerman


Outflows from leveraged loan funds moderate in 16th consecutive withdrawal


Cash outflows from bank loan funds moderated to $428 million during the week ended Oct. 29, from a $1.7 billion outflow in the previous week, according to Lipper. The latest reading represents a 16th consecutive weekly withdrawal and the 27th outflow in the past 29 weeks, for a net redemption of $17.1 billion over that span.

The current reading reflects mutual fund outflows of $418 million, plus a $10 million outflow from exchange-traded funds. The influence of ETFs had been running a bit hotter, at 6% of the outflow last week and 8% the week prior.

The trailing-four-week average is negative $964 million, versus negative $1.2 billion last week. Recall that last week’s observation was the third largest outflow on record and the highest since $1.3 billion in the week ended Aug. 31, 2011.

The year-to-date fund-flow reading pushes deeper into negative territory, at roughly $10.1 billion, and it’s essentially all mutual funds, with ETFs technically positive $23 million for the year. In the comparable year-ago period, inflows totaled $47.3 billion, with 11% tied to ETFs, or $5.1 billion.

The change due to market conditions was positive $217 million, versus total assets of $96.7 billion at the end of the observation period, for roughly a 0.2% gain. The ETF segment comprises $7.4 billion of the total, or approximately 8%. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.



MVC Capital hires mezzanine lending team from Fifth Third

MVC Capital hired a team of four from Fifth Third to expand mezzanine lending, reflecting the bank’s move away from that business.

The hires include David J. Williams, who co-founded Fifth Third’s Mezzanine Finance Group in 1999. He joins the company as managing director.

Harrison S. Mullin also joins as a managing director. David R. Gardner and Scott D. Foote are also part of the new team.

The team will join Tokarz Group Advisers, the external manager of MVC, and will be based in Cincinnati.

MVC Capital, a BDC that trades on NYSE as MVC, targets small and middle-market companies for growth investments, acquisitions and recapitalizations. The fund typically invests $3-25 million for control and non-control stakes in Midwestern U.S. companies generating annual revenue of $10-200 million and EBITDA of $3-25 million. – Abby Latour


Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more


Exide lambastes cred panel’s ‘incoherent accusations’ about DIP

Exide Technologies lambasted the unsecured creditors’ committee acting in its Chapter 11 proceedings, accusing the panel in a bankruptcy court filing of “playing a dangerous blame game in an attempt to substitute its own agenda for the debtor’s business judgment.”

The focus of the company’s ire is the committee’s objection to approval of proposed amendment to Exide’s DIP facility, and the committee’s request that the bankruptcy court order a 30-day process for the company to consider alternative DIP financing proposals.

As reported, the committee’s primary objection to the proposed amended DIP is that the facility’s allegedly tight milestone deadlines are designed to enable the company’s DIP lenders, many of which are also pre-petition noteholders, to credit bid the company’s most valuable asset, its equity interest in its international subsidiaries. Among other things, the committee alleged that the company refused to give other lenders identified by the committee a fair shot at providing an alternative DIP facility on less restrictive terms (see “Exide panel slams amended DIP; wants alternate financing considered,” LCD, Oct. 24, 2014).

The company’s defense of its proposed amended DIP and its reorganization process, of course, is to be expected, but the attack on and mockery of the unsecured creditors’ committee in the company’s Oct. 28 response to the panel’s objection, while perhaps simply a matter of style, is nonetheless notable given the typical practiced blandness and formality of legal prose.

The company accused the committee of attacking the amended DIP “with guns blazing,” of filing an objection “littered with haphazard barbs,” of expressing “righteous conviction” in its assertion of a “nefarious” scheme, of leveling “incoherent accusations,” of pushing a “conspiracy theory,” and of “casting aspersion” on the company and its professionals, the unofficial noteholder committee, and the company’s DIP lenders “for their alleged master plan to force milestones on the debtor that will result in a credit bid sale in which they will steal the company from junior creditors.”

“The committee’s scorched-earth litigation challenge to the DIP financing is reckless brinkmanship by a desperate constituent acting like it has nothing to lose,” the company said, adding, “It is no secret that the committee fundamentally disagrees with the debtor and senior creditors regarding the trajectory of this case.”

More specifically, the company charges, “The committee seems to disagree with the debtor’s decision to engage with the [unofficial noteholder committee] regarding strategic options.” However, the company continues, “Given that the UNC member’s consent would be required if their claims are to be equitized and they have consistently been the most likely source for investment in any reorganized entity, this group obviously represents the ‘fulcrum’ security here, no matter how much the committee wishes the facts were otherwise.”

Lastly, the company notes, its exclusivity period is slated to expire on Dec. 10. “The committee can then put its money where its mouth is, if it so desires.”

As reported, the unsecured creditors’ committee support for the company has waxed and waned over the course of the case.

On June 17, for example, in response to a motion from the company to extend its exclusivity periods, the creditors’ committee said it had “genuine concerns regarding the [company’s] process in formulating and developing a plan,” adding, “To date, the debtor has not engaged the committee with respect to the plan.”

And on June 30, after the company unveiled the terms of a proposed reorganization plan supported by noteholders – calling it “highly constructive” and its “likely path… to emerge from Chapter 11” – the creditor panel responded that the company had, up to that point, “refused to negotiate with the [creditors’] committee, or, for that matter, any party other than the [noteholders’ committee] in connection with the structure of a plan of reorganization and an exit strategy.” Further, the committee said, the company had “also shunned the [creditors’] committee’s efforts to open the plan process to third parties.”

But on July 31, the company said in a court filing that it had begun negotiations with the official unsecured creditors’ committee, stating that it and the noteholders’ panel had exchanged term sheets with the creditors’ committee and “conducted several in-person meetings among the professionals in an effort to achieve a consensual plan construct.” The company said that the creditors’ committee was currently “evaluating the latest plan proposal and is expected to provide feedback.”

More recently, when the company announced its dual-track approach to a reorganization on Sept. 30, it said it was working toward a “modified proposal that would pay or refinance the existing DIP facility and provide additional capital to fund its reorganization,” adding that it was hopeful that it would reach agreement on a term sheet for a reorganization plan supported by the official creditors’ committee “in the near term.”

Since then, however, the spirit of cooperation appears to have gone south. Last week, the committee filed a motion to compel the company and the unsecured noteholder committee to produce documents in response to discovery requests. That dispute is slated to be heard tomorrow (see “Exide discovery spat with panel may portend bigger fights ahead,” LCD, Oct. 22, 2014).

The discovery spat proved to be a harbinger of the committee’s objection to the amended DIP, filed the next day. A hearing on that is scheduled for Oct. 31. – Alan Zimmerman