Daily News: November 20, 2017

BofA Agents $85MM DIP for Real Industry


Real Industry initiated restructuring efforts by filing a petition for voluntary Chapter 11 reorganization in the U.S. Bankruptcy Court for the District of Delaware along with Real Alloy Holding and its U.S. subsidiaries.

Real Alloy’s operations in Germany, the UK, Norway, Canada and Mexico and its Goodyear, AZ joint venture are not included in these filings. During the Chapter 11 process, Real Alloy expects to conduct business as usual in the U.S. and worldwide and to continue to provide customers, suppliers and other business partners.

Summary points on the Chapter 11 proceedings are:

  • Real Alloy entered into an agreement in principle with its existing asset-based facility lender and certain of its bondholders for continued use of its $110 million ABL facility and up to $85 million of additional liquidity through debtor-in-possession (DIP) financing that will provide Real Alloy the ability to continue to fund ongoing business operations.
  • This DIP financing is a consensual arrangement executed with Real Alloy’s principal lender and holders of a majority of its bonds, with the ability to provide Real Alloy with immediate incremental liquidity.
  • This substantially increased liquidity at Real Alloy provides it with the financial flexibility to continue to serve its customers and pay its suppliers.
  • Real Industry will initiate a plan of reorganization to preserve the value of its net operating loss tax carryforwards.

According to a related 8-K filing, Bank of America is serving as administrative agent for the DIP financing.

Real Alloy’s operations in the U.S. have been affected by severely tightened liquidity during the past year, due in part to recently constrained trade credit terms, which hindered Real Alloy’s ability to timely refinance its $305 million 10% senior secured notes due January 2019 or to expand borrowing capacity under its ABL facility. An extensive review by the Real Industry board of directors, Real Alloy board, management and advisors determined it would be in the best interest of all Real Alloy stakeholders to initiate the Chapter 11 proceedings.

Real Alloy will undertake this process with enhanced liquidity in the form of DIP financing including a combination of continued use of Real Alloy’s $110 million asset-based lending facility, and up to $85 million in incremental liquidity provided by certain holders of the senior secured notes to maintain normal operations while Real Alloy continues the process of improving its long-term capitalization, including addressing the senior secured notes. The DIP financing also includes the conversion of $170 million of senior secured notes into new notes.

Subject to court approval, which is anticipated shortly, this DIP financing combined with funds generated from ongoing operations will be used to support Real Alloy’s normal operating and working capital requirements, including employee wages, salaries and benefits, and supplier payments during the reorganization effort under Chapter 11. Real Alloy has filed the customary motions in order to make these and other normal operating payments during the Chapter 11 proceedings and expects to receive such approval shortly.

Terry Hogan will continue to lead Real Alloy as president. In connection with the filing of Chapter 11 proceedings, Michael Hobey was named president and interim CEO at Real Industry, and he will continue to serve as CFO at the company. Hobey will also serve as CFO at Real Alloy.