Elah Holdings Inc fka RELYQ (ELLH)

[Enterprising Investor]

New RELY DIP Facility (1/17/18)

n January 10, 2018, in connection with the Chapter 11 Proceedings, the Company entered into a commitment letter (the “210 Commitment Letter”) with 210 Capital, LLC (“210 Capital”) and the Private Credit Group of Goldman Sachs Asset Management, L.P. (“GSAM”), pursuant to which 210 Capital and GSAM on behalf of one or more of its managed funds (collectively, the “Lenders”) have agreed to provide up to an aggregate $5.5 million in senior secured superpriority debtor-in-possession financing (the “210 DIP Facility”) to the Company on the terms set forth in the 210 Commitment Letter and the definitive documentation to be negotiated, executed and delivered by the Company and Lenders related to the 210 Commitment Letter, including credit, security, collateral and guarantee agreements and promissory notes (collectively, the “210 DIP Documents”). Further, in the 210 Commitment Letter, the Lenders have committed, on the effective date of a plan of reorganization of the Company from the Chapter 11 Proceedings (“Plan of Reorganization”), to (i) purchase to-be-issued shares of common stock of the Company equal to 45-49% (depending on applicable tax limitations) of the outstanding common stock of the Company for $17.5 million (the “210 Equity Commitment”) and (ii) make available to, or arrange a credit facility for, the Company of up to $500 million to enable the Company to pursue its business plan, including the acquisition of operating businesses (the “Post-Reorganization Credit Facility”).

Concurrently with the execution of the 210 Commitment Letter, the Company terminated its previously disclosed commitment letter, dated December 21, 2017, with Goldman Sachs & Co., LLC, which provided for $4 million in senior secured superpriority debtor-in-possession financing at 12% interest and a $10 million equity purchase commitment upon confirmation of the Plan of Reorganization.

On January 10, 2018, the Debtors filed a Notice of New Proposed DIP Lenders and Filing of Revised Proposed DIP Order and New Commitment Letter notifying parties-in-interest of the process by which the Company determined to enter into the 210 Commitment Letter and that the Debtors would be seeking approval from the Bankruptcy Court of the 210 DIP Documents, including the credit agreement for the 210 DIP Facility (to be filed with the Bankruptcy Court prior to the hearing on such motion) on the terms set forth in the 210 Commitment Letter, as well as approval to execute the 210 DIP Documents, and perform under the terms of the 210 Commitment Letter and 210 DIP Documents. The hearing of the Bankruptcy Court on such motion is scheduled to be held on January 17, 2018.

Lenders’ obligation to provide the 210 DIP Facility is subject to various conditions customary for debtor-in-possession financing of this type, including (i) entry of an order by the Bankruptcy Court, in form satisfactory to the Lenders, approving the Company’s execution and performance of the 210 Commitment Letter and the 210 DIP Documents (such order, the “DIP Order”), (ii) execution of the 210 DIP Documents, (iii) no Material Adverse Change (as defined in the 210 Commitment Letter) between the date of the 210 Commitment Letter and the DIP Closing Date (defined below), (iv) satisfaction of various conditions precedent described in the 210 Commitment Letter, including the Company’s and Lenders’ execution and delivery of the 210 DIP Documents substantially consistent with the 210 Commitment Letter and acceptable to the parties, (v) Lenders’ completion of its financial, legal, accounting and tax diligence with the respect to the Company and the 210 DIP Facility by anuary 17, 2018, (vi) Lenders’ receipt of internal approvals by January 17, 2018, and (vii) the Company’s delivery to Lenders of a budget acceptable to Lenders. If such conditions are met, the closing date for the 210 DIP Facility (the “DIP Closing Date”) is scheduled to occur as early as three business days from the entry of the DIP Order. Lenders’ obligation to provide the 210 DIP Facility and otherwise perform under the 210 Commitment Letter will terminate on the earliest to occur of (w) January 10, 2018 at 5:30 pm Eastern time if the Borrower had not accepted the 210 Commitment Letter and filed a notice of entry into the 210 Commitment Letter with the Bankruptcy Court; (x) January 22, 2018 at 11:59 pm New York City time, if the DIP Closing Date has not occurred by such date, (y) the Company’s entry into an agreement or request for approval of the Bankruptcy Court for any debtor-in-possession financing or equity investment except as contemplated by the 210 Commitment Letter, or (z) the Company’s material breach of the 210 Commitment Letter.

Lenders will make available the funds under the 210 DIP Facility in accordance with the initial budget agreed upon between the Company and Lenders, to be updated on a monthly basis, or more frequently at Lenders’ request (the “Budget”). The Company’s variance from the Budget cannot exceed 10% of total operating disbursements and its restructuring expenses, tested on a rolling four-week basis beginning one week following the DIP Order and each week thereafter, with certain exceptions as set forth in the 210 DIP Documents (including cash receipts and fees of Lenders and its professionals).

The 210 DIP Facility will mature, and the Company must pay and otherwise fulfill its obligations thereunder, on the date that is the earliest to occur (such earliest date, the “Maturity Date”) of (a) November 17, 2018 (one year following the date of filing of the Debtors’ bankruptcy petition; the “Stated Maturity Date”); (b) the effective date of a Chapter 11 plan of reorganization for the Company that is confirmed by the Bankruptcy Court; or (c) the acceleration of the 210 DIP Financing and related termination of the commitments thereunder, including as a result of an Event of Default (as defined in the 210 Commitment Letter) or default under the DIP Order.

Interest on the amounts borrowed under the 210 DIP Facility will accrue and be payable monthly at a rate of 11% per annum; an additional 2.00% per annum will apply during the continuance of an Event of Default, payable monthly.

The Company may, at its option, elect to repay amounts borrowed under the 210 DIP Facility by providing advance notice to Lenders and by paying the redemption price of 100% of the principal amount of the borrowing under the 210 DIP Facility to be repaid, plus accrued and unpaid interest to the date of redemption, plus an amount (the “Make-Whole Amount”) that is the greater of (1) 2.0% of the repayment amount and (2) the amount equal to the difference between (x) the aggregate amount of interest that would have been paid in respect of the repayment amount between the repayment date and the Maturity Date and (y) the aggregate amount of interest Lenders would earn if it reinvested the repayment amount for the same time period at the Treasury Rate (to be defined in the 210 DIP Documents) plus 50 basis points. Upon the sale of certain specified assets of the Company or its non-Debtor subsidiaries, the sale proceeds will be used to pay down amounts borrowed under the 210 DIP Facility but such repayments will not require the payment of a Make-Whole Amount.

Upon the occurrence of certain mandatory repayment events, including the issuance of debt or equity securities (other than in connection with the 210 Commitment Letter) or an asset sale, catastrophic event or extraordinary receipt, the Company shall pay the net proceeds of such event in the same manner as it may make an optional repayment, including accrued and unpaid interest and the Make-Whole Amount, as applicable. Once the Company has repaid or prepaid any amounts under the 210 DIP Facility, such amounts may not be reborrowed.

The obligations of the Company under the 210 Commitment Letter and 210 DIP Documents will have priority over all other allowed Chapter 11 or Chapter 7 administrative expenses of the Company under the Bankruptcy Code, subject to a carveout as specified in the DIP Order, and shall be secured by liens on and security interests in substantially all of the assets and property of the Company and certain of its non-Debtor subsidiaries. The proceeds of the 210 DIP Facility will be used by the Company, as permitted by the DIP Order, the Budget, and the 210 DIP Documents, for general working capital, operational expenses and restructuring expenses. Neither proceeds nor amounts for administrative claims carved out for priority status over the 210 DIP Financing or other amounts may be used for the Company to assert claims against Lenders. In addition, the Company’s obligations under the 210 DIP Facility are being guaranteed by certain of the Company’s direct subsidiaries that are not Chapter 11 debtors.

Lenders will provide the entirety of the 210 DIP Facility.

In consideration of Lenders’ provision of the 210 DIP Facility and the Equity Commitment (defined below), on the DIP Closing Date, the Commitment Letter provides for the Company to pay a fee of $200,000 and issue shares of the Company’s common stock to Lenders equal to 4.9% of the Company’s outstanding common stock in a private placement; upon subsequent discussion of the parties, this up-front payment shall be $200,000 in cash only. The Company will also pay all reasonable and documented out-of-pocket fees and expenses of Lenders in connection with the matters contemplated by the 210 Commitment Letter, including legal, accounting or other professional fees, in connection with the 210 Commitment Letter, transactions contemplated thereby, and the preparation of the 210 DIP Documents. On January 16, 2018, the parties agreed to modify the Commitment Letter to delete the provision relating to the issuance of 4.9% of the Company’s common stock as part of the “upfront fee”. Under certain circumstances, if the Equity Commitment terminates, the Lenders will be entitled to the issuance of 4.9% of the Company’s common stock.

New Equity and Credit Facility Commitment

In addition to the 210 DIP Financing, pursuant to the Equity Commitment, Lenders have committed to purchase shares of common stock on the effective date of the Plan of Reorganization for up to $17.5 million, such that following such purchase, Lenders will own 45 – 49% (to be determined by the parties based on applicable tax limitations) of the common stock of the reorganized Company. Further, the Lenders have committed to provide or arrange the Post-Reorganization Credit Facility to enable the Company to pursue its business plan, including the acquisition of operating businesses.

Lenders’ obligation to provide the Equity Commitment and Post-Reorganization Credit Facility will be subject to the satisfaction of conditions set forth in the 210 Commitment Letter and the definitive documents related thereto, which will include, among other conditions customary for this type of investment, (i) the entry of an order in form acceptable to the Lenders (such order, the “Confirmation Order”) by the Bankruptcy Court confirming the Plan of Reorganization and documents related thereto; (ii) adoption of new governance documents and related documentation satisfactory to Lenders, including articles of incorporation and bylaws, shareholders agreement, registration rights agreement, and related documents and policies, which will include, among other items, (a) a requirement of up to 55% shareholder approval for certain transactions (including incurrence of, guarantee of obligations of, or liens for material indebtedness, issuance of common or preferred stock, or making prohibited restricted payments), (b) a structure of the board of directors of the reorganized Company reflective of Lenders’ stock ownership (including at least one independent director appointed by Lenders) and satisfactory to Lenders, (c) independent board member approval for certain transactions, (d) requirement of written approval by the board of directors (which approval shall not be provided without Lenders’ prior written consent) for any transfer of stock by or to any shareholder who owns or would own 4.75% of the outstanding common stock, and (e) a right of first refusal for Lenders with respect to any financing for the Company’s acquisition activities for the two-year period following the effective date of the Plan of Reorganization; (iii) satisfaction of certain tax-related conditions, including no material impairment of the availability of any tax attributes; (iv) the non-occurrence of any event of default under the 210 DIP Facility and the repayment in cash in full of all amounts borrowed thereunder; and (v) the retention, disposition or abandonment of the Company’s subsidiaries in a manner satisfactory to Lenders. In the event that the Company does not proceed with the Equity Commitment with Lenders, the Company shall be obligated to pay a break-up fee of $300,000. On January 16, 2018, the parties agreed to modify the Commitment Letter to provide that under certain circumstances, if the Equity Commitment terminates, the Lenders will also be entitled to the issuence of 4.9% of the Company’s common stock.

The 210 Commitment Letter includes covenants requiring achievement of certain milestones related to the 210 DIP Facility and Equity Commitment (“DIP Milestones”), in each case to be satisfied satisfactorily to Lenders, including: (i) the Company’s filing, in each case in form acceptable to Lenders, of the Plan of Reorganization and related disclosure statement (such disclosure statement, the “Disclosure Statement”) with the Bankruptcy Court on or before February 16, 2018; (ii) entry of an order by the Bankruptcy Court approving the Disclosure Statement on or before March 29, 2018 (subject to court availability); (iii) the parties’ execution of definitive documents related to the Equity Commitment no later than five days prior to the hearing of the Bankruptcy Court to consider confirmation of the Plan of Reorganization; (iv) entry of the Confirmation Order on or before May 1, 2018; and (v) the Company’s satisfaction of all conditions to consummate the Plan of Reorganization no later than ten days after the entry of the Confirmation Order.

The 210 DIP Documents will contain representations and warranties, conditions precedent, negative covenants, affirmative covenants, events of default, indemnification and release provisions, and other terms consistent with the 210 Commitment Letter and customary for a financing of this type.

The foregoing description of the 210 Commitment Letter and the 210 DIP Facility does not purport to be complete and is qualified in its entirety by reference to the 210 Commitment Letter filed as Exhibit 10.1 hereto and incorporated herein by reference.

autionary Note Regarding the Company’s Common Stock

The Company cautions that trading in its securities during the pendency of the Chapter 11 Proceedings is highly speculative and poses substantial risks. Trading prices for the Company’s securities may bear little or no relationship to the actual recovery, if any, by holders of such securities in the Chapter 11 Proceedings.

Additional Information on the Chapter 11 Proceedings

Court filings and other information related to the court-supervised proceedings are available at a website administered by the Company’s claims agent, Prime Clerk, at https://cases.primeclerk.com/realindustry. Additional information on Real Industry can be found at its website www.realindustryinc.com.

https://www.sec.gov/Archives/edgar/data/38984/000003898418000002/rely-20180110x8k.htm