Renovate America files bankruptcy with plans to sell Benji business

By Sarah Lizee

Olympia, Wash., Dec. 23 – Renovate America, Inc. filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on Monday.

The company’s chief executive officer, Shawn Stone, said that Renovate America maintained two business divisions, called HERO and Benji. HERO, which has been wound down and ceased accepting homeowner’s applications in October, originated Property Assessed Clean Energy (PACE) assessments for residential projects.

PACE programs, authorized by local governments under state legislation, offer financing in the form of property assessments for residential and commercial renewable energy and efficiency improvements.

Benji provides home improvement financing to contractors and homeowners.

Stone said that in recent years the debtors’ HERO (PACE) business suffered from declining assessment originations as a result, in part, of legislation that became effective in April 2018.

“This legislation tightened credit underwriting criteria and made the underwriting process more cumbersome, drastically reducing the debtors’ pool of potential HERO customers, and made it more difficult for contractors to participate in the HERO program,” Stone said in a declaration.

He added that the company also incurred significant expenses to defend against and settle growing litigation against it stemming from its HERO business.

And, the global Covid-19 pandemic had a considerable negative impact on the debtors’ revenues.

“As a result of these factors, the debtors’ revenues and liquidity profile – including their working capital balance and EBITDA – have become dramatically impaired,” Stone said.

DIP details

The debtors filed a motion seeking approval of an up to $50 million senior secured super-priority debtor in possession credit facility, with $18 million available on an interim basis.

The financing will be provided by Finance of America Mortgage LLC.

The facility will mature 90 days after the closing date of the facility, at the latest.

Interest will be 7% per annum, compounded monthly.

There is a $175,000 origination fee.

Stalking horse agreement

On Monday, the debtors entered into an asset purchase agreement with Finance of America Mortgage as stalking horse bidder for substantially all of the debtors’ Benji assets.

The purchase price under the stalking horse agreement is equal to $5 million, plus assumed liabilities, plus the aggregate purchase price for the loans to be purchased by Finance of America from Renovate, plus the contract prepayment amount.

The agreement provides for a break-up fee of $400,000 and an up to $250,000 expense reimbursement.

Under the proposed bidding procedures, bids are due by 8 p.m. ET on Feb. 9, an auction would be held on Feb. 12, if needed, and a sale hearing would take place on or before Feb. 18.

Debt details

The company listed $50 million to $100 million in assets and $100 million to $500 million in liabilities.

Its largest unsecured creditors are SFII Rancho Bernardo, LLC, based in San Francisco, with a $13.63 million rent claim, and the State of California Office of District Attorney, based in Riverside, Calif., with a $2.7 million legal settlement claim.

Renovate America is a San Diego-based provider of financing solutions for environmentally friendly home improvement projects. The company filed bankruptcy under Chapter 11 case number 20-13172.

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