Tanner & Haley seeks further DIP amendments to provide more liquidity

By Caroline Salls

Pittsburgh, Nov. 10 - Tanner & Haley Resorts requested court approval to further amend its replacement debtor-in-possession facility to provide more liquidity to allow the company to operate its business in the upcoming months, according to a Friday filing with the U.S. Bankruptcy Court for the District of Connecticut.

On Nov. 3, the company obtained court approval to add a total of $2 million to the DIP facility and reduce required reserves on availability by about $4 million, increasing the total DIP availability to $82 million from $80 million.

In exchange for the additional liquidity, the company agreed to increase the interest rate on $5 million of the DIP facility to 20% higher than the rest of the DIP facility.

Tanner & Haley said it has not yet closed on the replacement DIP facility, and since approval of the first amendment, the company decided more liquidity was needed.

Under the new amendment, the holdback, which is the portion of the pre-bankruptcy amount owed to pre-bankruptcy lender Patriot Group, LLC as to which repayment would be deferred, would be increased to $3.5 million from $2 million.

In addition, Patriot would be entitled to an exit fee, payable at the time of payment of the holdback, equal to the difference between $875,000 and the interest accruing on the holdback from the date of the DIP closing through the date of payment, provided however, that if any portion of the holdback is repaid to Patriot by Nov. 30, the holdback exit fee would be reduced by an amount equal to 20% of the principal portion of the early holdback repayment, for a $700,000 maximum potential reduction in the fee.

Subject only to the DIP facility's carve-out, no professionals' fees or expenses would be paid in Tanner & Haley's Chapter 11 case until the holdback, holdback interest and the holdback exit fee have been paid in full.

The company said the additional liquidity afforded by these proposed modifications will allow it to finish a review of investor/purchaser proposals and to facilitate a prompt exit from bankruptcy.

By contrast, the company said it believes that if the DIP facility is consummated without these changes, it would not be able to fund its operations, including payroll, in the short run and may not be able to continue as a going concern for more than a few weeks.

Tanner & Haley is a hospitality and real estate company based in Westport, Conn. It filed for Chapter 11 on July 23, and its case number is 06-50245.

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