Don’t miss out on news you won’t find anywhere else — get The Memo US and The Memo Europe in your inbox every two weeks.
Anthology is facing a potential upset of its proposed DIP financing based on another unequal roll-up in the Southern District of Texas.
The education technology company sailed through an uncontested first-day hearing receiving approval of all requested relief, including interim approval of a $100m priming DIP with a 1:1 roll-up of prepetition debt and $50m in new term loans, as reported by 9fin, which is being funded by an ad hoc group of prepetition lenders led by Oaktree Capital Management and Nexus.
Prepetition lender, Vector Capital, represented by Glenn Agre has objected to final approval of the proposed DIP arguing that it was excluded from participation in violation of “sacred rights” under its prepetition credit agreement with the debtors that provides for mandatory pro rata sharing.
Perhaps tellingly, counsel for administrative agent for the debtors’ prepetition facilities, JPMorgan, remained silent at the first day hearing. The agent’s reservation of rights stated that it had “no involvement or input with respect to the negotiation of the proposed DIP financing,” and it was taking no position with respect to interim relief but reserved all rights with respect to the final hearing.
As previously reported by 9fin, non-pro rata rollups may be subject to extra scrutiny given the Southern District of Texas’s recent ruling in ConvergeOne reversing the the bankruptcy court’s approval of an exclusive backstop. 9fin broke down the ConvergeOne opinion here.
Bankruptcy Judge Alfredo Perez is likely to consider the sacred rights issue carefully given the implications of potential unfair treatment of the excluded lenders’ claims if the priming DIP is approved.
The second day hearing on final approval of the DIP and other matters previously scheduled for 3 November has been adjourned to 12 November.
Anthology’s Chapter 11 docket can be found here.
