Value City gets OK to terminate loans, replace letter-of-credit issuer

By Jennifer Lanning Drey

Portland, Ore., July 16 - Value City Holdings, Inc. received court approval to terminate its pre-bankruptcy and debtor-in-possession secured financing facilities to resolve all outstanding issues between the company and its secured creditors, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The court also affirmed that the principal and interest on the facilities has been paid in full and ordered the secured lenders to transfer Value City's cash held in cash collateral accounts, according to the filing.

Value City also gained court approval to enter into a letter-of-credit agreement under which Bank of America, NA will provide up to $10.5 million in substitute letters of credit.

According to the motion requesting the approvals, Value City had satisfied its obligations under the pre-bankruptcy and post-bankruptcy credit facilities by Dec. 1, 2008 and had deposited more than $10.5 million in cash to cash collateralize the obligations of the lender agent in its role as issuer of the company's letters of credit.

The DIP facility expired on April 1, but Value City said its lenders still provided some services to the company, including maintenance of bank accounts and control over reserve accounts established under the DIP loan agreement.

The company said it received a notice on May 13 that the DIP facility agent would not renew Value City's letters of credit when they expired.

As a result, Value City said it sought Bank of America as an alternative provider to issue replacement letters of credit.

Value City, a Columbus, Ohio, off-price retailer, filed for bankruptcy on Oct. 26, 2008. Its Chapter 11 case number is 08-14197.

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