COURT: Erickson judge grants interim approval of DIP financing, operational motions at first day hearing

ericson

As first reported in Debtwire10 November 2016 | 17:12 EST

The bankruptcy judge overseeing the Chapter 11 case of Erickson Inc today approved the company’s first day motions, including use of its two debtor-in-possession (DIP) financing facilities.

Judge Harlin “Cooter” Hale of the US Bankruptcy Court for the Northern District of Texas approved the helicopter services provider’s motions to pay employee wages, cash management and retention of Kurtzman Carson Consultants (KCC) as claims agent. The judge did not set a “second day” hearing for final approval of today’s motions.

Erickson filed for Chapter 11 on 8 November with USD 66.67m in term loan DIP financing from its second lien lenders and another DIP from its first lien lenders that will partially roll up USD 130m in first lien debt. The DIP requires the company to confirm a reorganization plan by 7 April 2017. Debtor counsel Kenric Kattner of Haynes & Boone said today that the company is taking a three-pronged approach to its reorganization: reduce costs, restructure its balance sheet and determine what, if any, aircraft leases it will reject.

The company met resistance to its DIP financing from the office of the US Trustee, who took issue with a provision that would have the company make a USD 14.2m payment to perform under a contract with Military Sealift Command, the transportation provider for the US Department of Defense. The trustee said that the debtor had not taken the proper steps to make the payment, and that the company was essentially assuming a lease on the first day without actually filing a motion to do so.

The parties broke this afternoon to negotiate and returned with an agreement that will approve the DIP on an interim basis, though the details of the deal were not revealed.

The term loan DIP comes from holders of the company’s USD 355m 8.25% second lien notes due 2020, while Wells Fargo is agent on the first lien debt and the revolver DIP. The financing requires the company to win final DIP approval by 12 December, confirm a Chapter 11 plan by 7 April and put a plan into effect by 17 April.

The 8.25% notes last traded today at 37.75, down from 44.5 a month ago, according to MarketAxess.