Mervyns granted interim access to $465 million DIP loan; final hearing set for Aug. 26

By Caroline Salls

Pittsburgh, July 31 - Mervyns received court approval to use its $465 million debtor-in-possession financing on an interim basis as part of the court approval of its "first-day" bankruptcy motions, according to a company news release.

Wachovia Capital Finance Corp. (Western) is the DIP agent.

Mervyns said it will use the interim DIP financing and cash generated from its operations to continue to pay vendors and to provide operational and financial stability as it proceeds with its restructuring.

The final DIP loan hearing is scheduled for Aug. 26.

As previously reported, the DIP facility includes a revolving credit facility with a $125 million sublimit on letters of credit.

Interest on the revolving loan A is the adjusted Eurodollar rate plus 350 basis points or Prime rate plus 200 bps, at Mervyns' choice.

Interest on the revolving loan B is the adjusted Eurodollar rate plus 450 bps.

The DIP facility will mature on the earlier of Dec. 31, 2009 and the effective date of a plan of reorganization or liquidation.

In connection with the interim approval of its DIP financing facility, Mervyns said it also reached an agreement with its existing lenders on the terms of the consensual use of its cash collateral during the company's Chapter 11 cases.

The court also gave the company approval to pay pre-bankruptcy employee wages, health benefits, and other employee obligations during the restructuring, to pay ordinary post-bankruptcy expenses and to continue to honor all of its current customer policies regarding merchandise returns and all of its outstanding gift cards and loyalty programs.

"We are pleased that we can continue to serve our customers and purchase goods and services from our vendors as we seek to implement strategies to restructure our operations, strengthen our balance sheet and position Mervyns to compete more effectively," chief executive officer John Goodman said in the release.

Mervyns, a San Francisco-based department store, filed for bankruptcy on July 29 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 08-11586.

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