One of the most intriguing aspects of Residential Capital’s (ResCap) Chapter 11 reorganisation could be its debtor-in-possession (Dip) financing package.
The $1.45 billion super-priority secured facility provided to Ally Financial’s mortgage subsidiary, which filed for bankruptcy protection last week, is one of the biggest Dip financings since the financial crisis.
It’s also thought to be one of the most complex ever.
The facility consists of a $1.05 billion A-1 term loan, $200 million A-2 term loan, and a $200 million revolver. The syndicate is led by Barclays as sole lead arranger.
The Dip borrowers are two special purpose vehicle (SPV) subsidiaries, and their obligations are guaranteed on a super-priority secured basis by ResCap and its debtor subsidiary. The SPVs hold the first lien collateral for identification and monitoring. Along with the Dip funds, use of the assets is limited to the Dip budget allocations.
Asset purchase agreements with ResCap’s parent and fellow mortgage company, Nationstar, must be executed as a condition of closing, with the proceeds being used to repay the Dip facilities.
In addition to the Dip, ResCap will receive financial support through six arrangements.
Three of these are from its parent Ally Financial: a $150 million post-petition line of credit to fund Federal Housing Administration and Department of Veterans Affairs loan repurchases; a revolver; and a $750 million cash contribution upon confirmation of the plan.
RecCap will also receive support through Citi mortgage servicing rights, a Fannie Mae EAF facility, and the sale of unencumbered assets.
Each lender will fund its own collateral, including its allocated share of costs and servicer advance volatility.
Unusual Intercreditor arrangements are in place between Ally Financial’s $150 million facility and the banks’ $1.45 billion Dip facility.
Check back for IFLR’s deal analysis of the financing once it closes.
Skadden Arps Slate Meagher & Flom is acting for Barclays, Morrison & Foerster is representing Residential Capital, and Mayer Brown is counsel to Ally Financial.