RHI Entertainment adds $15 million exit term loan to boost liquidity

By Caroline Salls

Pittsburgh, March 15 - RHI Entertainment, Inc. requested court approval to make changes to its plan of reorganization without being required to resolicit votes from creditors, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Under the proposed changes:

• A new $15 million exit term credit facility will be provided by some of the company's first-lien lenders in exchange for a grant of 25.5% of the new common stock to be issued under the plan.

RHI said this will reduce the amount of equity that would have otherwise gone to its first-lien lenders on account of their existing first-lien claims, but would not affect the grants of equity to second-lien lenders;

• Corporate governance and equity ownership provisions will be changed to reflect the grant of the new common stock to the exit term facility lenders and the rights sought by the lenders in consideration for the additional financing;

• Covenants in an exit revolving credit facility will be changed to provide a necessary financial cushion and operational flexibility;

• The interest rate, amortization and lien priority provisions governing the company's new $300 million third-lien term loan obligations will be amended. Interest on the third-lien loan will be Libor plus 300 basis points;

• The grant of equity rights under a new management incentive plan will be changed to provide that 4.5% of the new common stock to be issued to management may be forfeited to the exit term loan lenders if performance targets are not achieved; and

• The exit term loan lenders will receive additional rights under the plan, including rights to consent to condition precedent requirements and waive those requirements, as well as rights to exculpation, which were also granted to exit revolver lenders.

Liquidity needs

RHI said it was concerned that the liquidity to be provided by the $25 million exit revolver might not be enough several months after the company emerges from bankruptcy because of "unanticipated developments and changed circumstances."

As a result, the company negotiated a proposal to modify its pre-packaged plan and some plan exhibits to provide the $15 million exit term loan.

The exit term loan lenders will include Riva Ridge Capital, Caspian Capital Partners, LP, Catalyst Fund Ltd. Partnership II and other interested first-lien lenders.

RHI said the changes only affect the treatment of first-lien lenders and second-lien lenders, and all of the creditors in these classes were given the opportunity to review the proposed changes and asked to consent to the changes in writing.

Creditor consent

As of Tuesday, the company said it received consents from 15 of 22 first-lien lenders holding $464.7 million of $569.46 million of first-lien claims and all four holders of $81.60 million in second-lien claims.

In addition, RHI said recent settlements approved by the court last month will allow it to proceed with its consensual plan alternative.

The plan confirmation hearing is scheduled for March 29.

RHI is a New York-based developer, producer and distributor of new made-for-television movies, mini-series and other television programming. The company filed for bankruptcy on Dec. 10. The Chapter 11 case number is 10-16536.

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