Exit Financing in Chapter 11 Bankruptcy: Debt, Equity and Combination Structures

Recording of a 90-minute CLE webinar with Q&A


Conducted on Thursday, October 18, 2018

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE webinar will examine the different forms of exit financing currently available to Chapter 11 debtors, and some structural and procedural issues associated with each. The panel discussion will include best efforts vs. committed financing, high yield debt offerings, rights offerings and other equity structures.

Description

Exit financing is one of the keys to success for any plan of reorganization, providing liquidity for required distributions, refinancing existing indebtedness, and providing funds necessary to support the post-emergence business plan. Exit financing has become increasingly complex and can involve the issuance of debt or equity, or both.

The purest form of exit financing is secured or unsecured debt entered into with one or more lending institutions. The terms and conditions are not much different than those of a traditional credit facility outside of bankruptcy. However, there are some unique considerations, such as the importance of material adverse change clauses.

Debtors can now avail themselves of the high yield markets to support their plans, but high yield financing will require an escrow arrangement approved by the court. To appease lender concerns, the order must confirm that the issuer will be the reorganized company (vs. the pre-confirmation debtor); that the proceeds of the financing are not part of the bankruptcy estate; and the escrow entity will not be consolidated with the debtor until the effective date of the plan.

A debtor can also raise financing through the issuance of equity in the reorganized debtor. Where a current shareholder of the debtor wants to make a new investment in exchange for equity in the reorganized debtor, the arrangement must meet rigid requirements for a new value plan. A rights offering may offer a viable alternative, giving existing creditors the ability to protect their original investment while avoiding the issues arising under a new value plan.

Listen as our authoritative panel discusses these and other nuances of debt and equity exit financing strategies. The panel will discuss the pros and cons of various types of debt and equity financing, and the critical procedural considerations associated with each.

READ MORE

Outline

  1. Exit financing as an intergral part of the reorganization plan
  2. Debt financing
    1. “Best efforts” vs. committed financing
    2. Material adverse change and other clauses
    3. High yield debt offering: escrows, other terms, court approvals
  3. Equity
    1. New investment in exchange for equity in the reorganized debtor
    2. Bank of America v. LaSalle and new value concerns
    3. Rights offerings

Benefits

The panel will review these and other critical issues:

  • Why is “committed” preferable to “best efforts” financing in getting plan approval, and when might best efforts financing be preferable?
  • What are the escrow features of high yield debt, and what structural characteristics will the court consider when seeking approval?
  • What are the standard requirements for a “new value” equity plan?
  • How should a rights offering be structured to take advantage of applicable securities registration exemptions?

Faculty

Elrod, John
John D. Elrod

Shareholder
GreenberTraurig

Mr. Elrod focuses his practice on bankruptcy, creditors' rights, and commercial litigation. He regularly represents...  |  Read More

Keenan, Paul
Paul J. Keenan, Jr.

Shareholder
Greenberg Taurig

Mr. Keenan is a shareholder in the Restructuring & Bankruptcy Practice. His practice includes the representation of...  |  Read More

Other Formats
— Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

$297

Download

$297