Item 1.01. Entry into a Material Definitive Agreement.
As previously disclosed, Rand Logistics,
Inc. (“
Rand
”) has been involved in discussions with its lender under that certain Term Loan Credit Agreement,
dated as of March 11, 2014, by and among Lower Lakes Towing Ltd., Lower Lakes Transportation Company, Grand River Navigation Company,
Inc. and Black Creek Shipping Company, Inc., as borrowers, Rand LL Holdings Corp., Rand Finance Corp., Black Creek Shipping Holding
Company, Inc. and Rand, as guarantors, Guggenheim Corporate Funding, LLC, as agent, and the lenders party thereto (as amended from
time to time, the “
Second Lien Credit Agreement
”), with respect to a potential restructuring transaction
involving Rand and its direct and indirect subsidiaries (collectively, the “
Company
”). On November 17,
2017, the Company entered into a restructuring support agreement (the “
RSA
”) with the holder of all of
the indebtedness outstanding under the Second Lien Credit Agreement, Lightship Capital LLC (the “
Second Lien Lender
”),
which sets forth the material terms of a comprehensive restructuring of the Company through a pre-packaged chapter 11 plan of reorganization
as described therein (the “
Plan
”). The implementation of the Plan would result in the conversion of the
Second Lien Lender’s claims into 100% of the outstanding common stock of the reorganized Company, subject to dilution as
described below. The RSA contemplates that the Company will file for voluntary relief under chapter 11 of the United States Bankruptcy
Code (the “
Bankruptcy Code
”) in the United States Bankruptcy Court for the District of Delaware (the
“
Bankruptcy Court
”) on or before December 19, 2017, to implement the Plan in accordance with the term
sheet annexed to the RSA (the “
Term Sheet
”). The following description of the RSA (including the annexed
Term Sheet) is qualified by reference to the full text of such agreement, a copy of which is filed herewith as Exhibit 10.1 and
is incorporated herein by reference.
Pursuant to the terms of the RSA and the
Term Sheet, holders of claims and interests will receive the following treatment under the proposed Plan:
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All of the Second Lien Lender’s claims will be cancelled in exchange for 100% of the new
common stock to be issued by the reorganized Company, subject to dilution for an equity incentive plan for management and directors.
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All unsecured claims, including the claims of the Company’s vendors and trade creditors,
will be paid in cash in full or reinstated.
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Existing common and preferred shareholders of Rand will have their equity interests cancelled without
receiving any recovery or consideration and will cease to have an ownership or financial interest in the reorganized Company.
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Assuming the holders (the “
First Lien Lenders
”) of claims arising on
account of the Company’s existing revolving credit facility (the “
First Lien Credit Agreement
”)
vote to accept the Plan and, along with the agent under the First Lien Credit Agreement (the “
First Lien Agent
”),
execute joinders making them parties to the RSA, the claims of the First Lien Lenders will be modified and extended on terms to
be agreed upon by the Company, the First Lien Lenders and the Second Lien Lenders and will otherwise be unimpaired.
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Pursuant to the RSA, the Company, concurrently
with its efforts to consummate the Plan in accordance with the timeframes set forth in the RSA, is permitted to continue the process
previously initiated by the Company to pursue a sale of the Company’s assets or equity (the “
Approved Sale Process
”)
in a transaction that would (i) fund the treatment under the Plan for allowed administrative claims, other priority claims and
allowed general unsecured claims, (ii) pay in cash in full all of the claims of the First Lien Lenders and the Second Lien Lender
and (iii) pay any additional consideration to Rand’s existing common and preferred shareholders. The Company is conducting
the Approved Sale process in cooperation with Miller Buckfire & Co., LLC, the Company’s financial advisor. As provided
by the RSA, the Company can pursue the Approved Sale Process prior to the commencement of its chapter 11 process and thereafter
until December 31, 2017.
The Company has been engaged in discussions
with the First Lien Lenders, the First Lien Agent and the Second Lien Lender with respect to the prospect of the Company receiving
interim debtor-in-possession financing during the chapter 11 proceeding and exit financing upon consummation of the Plan. Those
discussions are ongoing; however, an agreement has not yet been reached and there can be no assurance that an agreement will be
reached in a timely manner, or at all.
The RSA contains certain covenants on the
part of the Company, the Second Lien Lender and the First Lien Lenders (in the event that they become party to the RSA), including
that the Second Lien Lender and the First Lien Lenders will vote in favor of the Plan and otherwise facilitate the restructuring
transaction, in each case subject to certain terms and conditions in the RSA. Under the RSA, the Company has agreed, among other
things, to (i) support the restructuring and the Plan in accordance with the timelines set forth in the RSA, (ii) act in good faith
and take all actions reasonably necessary, or as may be required by the Bankruptcy Court, to support and achieve the restructuring,
(iii) provide reasonable access to the Company’s books and records, (iv) use commercially reasonable efforts to obtain any
and all regulatory and/or third party approvals necessary to consummate the restructuring, and (v) take no actions inconsistent
with the RSA. The consummation of the Plan will be subject to customary conditions and other requirements.
The RSA may be terminated upon the occurrence
of certain events, including the failure to meet specified milestones related to filing, confirmation and consummation of the Plan,
among other requirements, and in the event of certain breaches by the parties under the RSA. Among other things, under the RSA,
the Company is required to (i) commence the solicitation of votes to accept or reject the Plan by December 12, 2017, (ii) commence
cases under chapter 11 by December 19, 2017, (iii) obtain entry of an order by the Bankruptcy Court confirming the Plan by January
26, 2018, and (iv) consummate the Plan by January 31, 2018 (subject to the right of the Company, the Second Lien Lender and the
First Lien Agent to extend the consummation deadline by mutual written consent). There can be no assurance that the transactions
contemplated by the RSA, the Term Sheet and the Plan will be consummated in a timely manner, or at all.
The Term Sheet provides for the establishment
of a customary equity incentive plan at the reorganized Company under which a portion of the new common stock of the reorganized
Company will be reserved for grants made from time to time to the directors, officers and other key employees of the reorganized
entity. The Term Sheet also provides for (i) releases under the Plan of all claims held by the Company, the First Lien Lenders
and First Lien Agent and the Second Lien Lender and Second Lien Agent and each of their current and former officers, directors,
members, employees, advisors, attorneys, professionals, accountants, investment bankers and other representatives against one another
and (ii) customary exculpations under the Plan.
The information contained in the RSA, including
the Term Sheet, and this Form 8-K are for informational purposes only and do not constitute an offer to buy, nor a solicitation
of an offer to sell, any securities of the Company, nor do they constitute a solicitation of consent from any persons with respect
to the transactions contemplated hereby and thereby. While the Company expects the restructuring will take place in accordance
with the Plan, there can be no assurance that the Company will be successful in completing a restructuring. Security holders are
urged to read the disclosure materials, including the disclosure statement, if and when they become available because they will
contain important information regarding the restructuring.