Cadence granted approval for $50 million DIP, customer accommodation agreement

By Jennifer Lanning Drey

Portland, Ore., Oct. 6 - Cadence Innovation obtained final court approval of a $50 million debtor-in-possession facility and of accommodation agreements with major customers General Motors Corp. and Chrysler according to a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, Bank of America, NA is the DIP lender agent.

The DIP financing will be in the form of a $50 million revolving credit facility, with a $2.1 million letter-of-credit sublimit.

The DIP agreement included a condition that the maximum revolver amount will be reduced to $35 million after 10 days from the bankruptcy filing.

The company will also have the option of requesting term loans from GM and Chrysler under the accommodation agreements.

The maturity date of the DIP revolver will be Dec. 31.

Interest will be Base rate plus 150 basis points.

Cadence will pay a $500,000 closing fee, a 50 bps unused portion fee, a 3.25% letter-of-credit fee and a 25 bps letter-of-credit fronting fee.

Accommodation agreement

Under the terms of the accommodation agreements:

• GM will pay the company $1 million and Chrysler will pay it $1.8 million within five days of entry of the order approving the agreements in full satisfaction of commercial claims;

• Both customers have agreed to pay liquidity enhancements in connection with their collateral as an inducement to lenders to provide additional liquidity.

The enhancements include a set-off rights limitation of 5% of the face amount of Cadence's post-bankruptcy receivables, an agreement to repurchase inventory acquired by Cadence to produce supplies for the customers at 100% of cost for raw materials and at the purchase order price for finished goods and an agreement to fund a last-out participation in the lenders' DIP loans to allow Cadence to fund tooling and equipment needed to produce supplies for GM and Chrysler;

• The agreements include a requirement that the lenders immediately eliminate a $6 million block under the loan agreement upon entry of the interim DIP financing order, increase the advance rate against the company's inventory to 70% for GM and Chrysler inventory and 90% against GM and Chrysler accounts receivable and immediately increase the amount of the block by $2.5 million for a carve out; and

• GM and Chrysler have agreed not to re-source business that Cadence produces for the customers during the time the company is attempting to sell some of its businesses as a going concern.

Cadence is a Troy, Mich.-based auto parts supplier. Its Chapter 11 case number is 08-11973.

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