Carestream Health DIP loan gets interim approval en route to reorganization plan

The bankruptcy court overseeing Chapter 11 proceedings at leveraged loan issuer Carestream Health has scheduled a combined hearing to approve the company’s proposed disclosure statement and confirm its reorganization plan for Sept. 28, according to a statement. court order.

The bankruptcy court also gave interim approval to the company’s $80 million debtor-in-possession (DIP) financing. The court also set a hearing on the final approval of the DIP for September 28.

The company filed a prepackaged Chapter 11 on Aug. 23 in Wilmington, Del. bankruptcy court to implement the company’s previously announced restructuring. According to court filings, the proposed reorganization plan has been unanimously approved by the company’s first and second tier lenders, while the company’s remaining creditors are untouched.

The company said the proposed reorganization plan would eliminate approximately $470 million in debt, or $250 million more than the amount previously announced by the company.

According to the proposed disclosure statement, the first-ranking claims, which would be permitted in the amount of $600.4 million (consisting of $507.7 million in term loan claims, $77 million in gun claims and accrued and unpaid interest), would receive a cash amount equal to 3% of the authorized debt as well as a pro rata share of a new term loan facility in the amount of between $536 million and $547 million (depending on the extent to which first-tier revolver claims holders elect to roll over a portion of their claims into a new revolver).

Second lien holders, who would be authorized up to $458 million, would receive 10% of the new common stock of the reorganized company and the right to purchase up to 80% of the new stock in a proposed $75 million rights offering. , subject to the dilution of a management incentive plan.

According to the disclosure statement, the company’s estimated enterprise value upon emergence would be in the range of $658 million to $777 million, with a midpoint of $714 million. Assuming net debt of $500 million at emergence, the imputed equity value of the reorganized company would be in the range of $158 million to $276 million, with a midpoint of $213 million. of dollars.

As for the DIP, meanwhile, the lenders are some of the company’s second-tier lenders. The facility consists of a tranche A of $5 million and a tranche B of $75 million. The company is asking for $50 million on an interim basis, split proportionately between the two tranches. The interest is one month adjusted Sofr + 900 bps.

Tranche A of the DIP is to be repaid in cash, while Tranche B lenders would first receive the cash proceeds of the rights offering and, to the extent the DIP remains unpaid thereafter, roll over their claims remaining shares into new ordinary shares at the rights offering price. In return for the rollover, the lenders would also receive 10% of the capital of the reorganized company.

Kirkland & Ellis is the company’s legal advisor, Houlihan Lokey its financial advisor and AlixPartners its restructuring advisor.

Akin Gump Strauss Hauer & Feld and GLC Advisors & Co. are respectively legal counsel and financial advisor to a group of first and second tier lenders to the Company.

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