Item 1.01Entry into a Material Definitive Agreement.
As previously disclosed, on August 30, 2020 (the “Petition Date”), Shiloh Industries, Inc. (the “Company”) and each of its domestic subsidiaries (together with the Company, the “Debtors”) filed voluntary petitions commencing cases under chapter 11 of title 11 of the U.S. Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Debtors’ chapter 11 cases (together, the “Chapter 11 Cases”) are being jointly administered under the caption In re: Shiloh Industries, Inc., Case No. 20-12024 (LSS) (Bankr. D. Del.). The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
Senior “Debtor-in-Possession” Financing
As previously disclosed, in connection with the Chapter 11 Cases, on the Petition Date, the Company filed a motion (the “DIP Motion”) seeking, among other things, interim and final approval of postpetition, debtor-in-possession financing (the “DIP Financing”) on the terms and conditions set forth in the proposed Superpriority Secured Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”), by and among the Company, the other Debtors party thereto as guarantors (the “Guarantors,” and together with the Company, the “Loan Parties”), the lenders party thereto (the “DIP Lenders”) and Bank of America, N.A., as Administrative Agent (the “Administrative Agent”). The DIP Credit Agreement provides for a senior secured superpriority debtor-in-possession credit facility not to exceed $123.5 million (the “DIP Facility”), consisting of (i) a $23.5 million new money subfacility consisting of revolving loans and (ii) a roll-up of $100 million of commitments under the Company’s existing revolving credit facility, which are deemed loans under the DIP Facility. $18.1 million of the DIP Facility is available following entry of the Interim DIP Order (defined below) and until the entry of the final order approving the DIP Credit Agreement (the “Final DIP Order”), secured by, among other things, (a) a first priority lien on all unencumbered tangible and intangible property and assets of the Loan Parties, (b) a first priority, senior priming lien on all prepetition collateral, and (c) all real property owned or leased by the Company or the Guarantors, subject to certain carve outs.
On September 1, 2020, the Bankruptcy Court issued an order approving the DIP Motion on an interim basis (Docket No. 59) (the “Interim DIP Order”) and authorizing the Loan Parties to, among other things, enter into the DIP Credit Agreement and initially borrow up to $18.1 million. On September 2, 2020, the Company entered into the DIP Credit Agreement with the Lenders, as well as the related postpetition security and pledge agreements with the Administrative Agent. The DIP Credit Agreement is subject to approval by the Bankruptcy Court, which has only been granted on an interim basis. The Debtors will seek final approval of the DIP Credit Agreement at a hearing before the Bankruptcy Court on or about September 25, 2020.
The proceeds from the DIP Financing will be used, subject to the Interim DIP Order and the Final DIP Order, (a) for working capital and other general purposes of the Debtors, including the payment of professional fees and expenses; (b) as provided in the Interim DIP Order and the Final DIP Order to pay the reasonable fees and expenses of the Administrative Agent and the DIP Lenders (including the reasonable fees and expenses of counsel and financial advisors); (c) to pay claims in respect of certain prepetition creditors, which may include, without limitation, employees, taxing authorities and trade vendors in the ordinary course, in each case to the extent authorized by orders of the Bankruptcy Court; and (d) to make adequate protection payments to the prepetition agent and prepetition lenders, each subject to the terms and conditions of the DIP Credit Agreement, the orders of the Bankruptcy Court approving the DIP Credit Agreement and consistent with the financing budget attached to the DIP Motion as an exhibit (the “DIP Budget”), subject to certain exceptions as provided in the DIP Credit Agreement.
The maturity date of the DIP Financing will be the earliest to occur of (a) January 2, 2021, (b) the effective date of a sale of all or substantially all assets of the Debtors and (c) the date upon which any plan of reorganization or plan of liquidation becomes effective. In addition, the DIP Financing is subject to certain repayment events, including, without limitation, 30 days after entry of the Interim DIP Order if the Final DIP Order has not been entered as and when required under the DIP Credit Agreement.
Interest on the outstanding principal amount of the revolving loans under the DIP Credit Agreement will be payable monthly in arrears and on the maturity date at a per annum rate equal to the then applicable Eurocurrency Rate plus: (a) with respect to Eurocurrency Rate Loans, 10.00% and (b) with respect to Base Rate Loans, 9.00%. Upon the occurrence and during the
continuance of an event of default, at the election of the agent with the written consent of the required lenders or at the written instruction of the required lenders, all obligations under the DIP Credit Agreement will bear interest at a rate equal to the then current rate plus an additional 2.0% per annum.
The DIP Financing will be subject to certain covenants, including, without limitation, related to the incurrence of additional debt, liens, the making of investments, the making of restricted payments, limits as set forth in the DIP Budget, and certain bankruptcy-related covenants, in each case as set forth in the DIP Credit Agreement, the Interim DIP Order and the Final DIP Order.
The DIP Credit Agreement requires delivery of, among other things, (a) a weekly financial statement including the balance of cash and cash equivalents of the Loan Parties, (b) a weekly “Budget Reconciliation Report,” and (c) an updated budget of projected receipts and expenditures of the Loan Parties for the thirteen-week period following such delivery.
The DIP Credit Agreement provides for customary events of default, including defaults resulting from non-payment of principal, interest or other amounts when due, failure to perform or observe covenants, and the occurrence of certain matters related to the Chapter 11 Cases. Pursuant to the DIP Credit Agreement, the Loan Parties will act in good faith and use commercially reasonable efforts to comply with the sale milestones as described below.
In addition, pursuant to the Interim DIP Order, the Company is subject to the following sale milestones relating to the Chapter 11 Cases:
|
|
•
|
within three business days following the Petition Date, the Debtors must file a motion with the Bankruptcy Court seeking to establish bidding procedures governing the sale of substantially all of the Debtors’ assets (the “Bidding Procedures Motion”);
|
|
|
•
|
by September 28, 2020 (subject to the availability of the Bankruptcy Court), entry of an order by the Bankruptcy Court approving the Bidding Procedures Motion;
|
|
|
•
|
by October 26, 2020, deadline for interested parties to submit bids for the purchase of the Debtors’ assets;
|
|
|
•
|
by October 29, 2002, deadline to hold an auction;
|
|
|
•
|
by November 10, 2020 (subject to the availability of the Bankruptcy Court), deadline for a Bankruptcy Court hearing to approve the sale(s) of substantially all of the Debtors’ assets (the “Sale Hearing”); and
|
|
|
•
|
by December 15, 2020, deadline to consummate the sale(s) of substantially all of the Debtors’ assets.
|