IronNet files Chapter 11 plan, gets interim approval of DIP loan

By Sarah Lizee

Olympia, Wash., Nov. 21 – IronNet, Inc. filed a Chapter 11 plan of reorganization and related disclosure statement on Monday with the U.S. Bankruptcy Court for the District of Delaware.

The disclosure statement hearing is scheduled for Dec. 4.

The company also received interim approval of a $10 million super-priority senior secured debtor-in- possession credit facility with ITC Global.

The facility is set to mature in 180 days and bear interest at 16% PIK per annum.

As a reminder, the company is pursuing a restructuring and a sale transaction on parallel paths.

Back in December 2022, the company started considering a sale, financing transaction, loan restructuring or bankruptcy filing. During the 10 months preceding the petition date, several potential bidders were contacted, but those efforts ultimately proved unsuccessful.

Without any actionable proposals, the company discussed the terms of a potential restructuring with its prepetition secured creditors, including director noteholders and C5, a beneficial owner of more than 5% of its outstanding common stock, and the DIP lenders, including ITC and C5.

The DIP lenders agreed to provide funding for the Chapter 11 cases, including funding for up to a 60-day post-petition marketing and sale process to test the value of the debtors’ assets and equity in the marketplace.

The DIP term sheet sets out a framework for the plan of reorganization in the event no actionable proposals result from the sale process.

Under the plan, DIP loans will be equitized, subject to dilution for management incentive plan equity.

Any additional post-petition financing, including a first-out or senior financing facility, on terms acceptable to the DIP lenders will either be repaid in full, roll into an exit facility or convert into equity of the reorganized debtors.

The claims of the prepetition secured creditors will be impaired on a consensual basis.

Trade claims and other liabilities will be unimpaired, other than holders of notes issued by the company.

All debt claims will receive a new compromise note in the principal amount of funds initially advanced, less any payments made to the lender on account of the note.

All compromise notes will contain a maturity of at least 36 months from the effective date of the plan, provided that no interest will accrue or be paid for the first 12 months after the effective date.

Holders of notes may have the option of receiving equity on account of their note claims, so long as that treatment would not render the claim unimpaired, provide for a recovery greater than the amount of its claims or violate the provisions of the bankruptcy code.

The reorganized company will have two classes of shares, common and preferred, and employee stock options exercisable for the purchase of common shares not to exceed 15% on a fully diluted basis at the discretion of the new board of the reorganized company.

The DIP loans and any debt held by C5 that C5 agrees to convert into equity of the reorganized company will be in the form of preferred stock, which will have a senior liquidation preference and other rights.

The company is proposing a Dec. 14 auction if qualified bids are received, a Jan. 11 plan voting deadline, and a Jan. 18 combined hearing on final approval of the disclosure statement and confirmation of the plan.

McLean, Va.-based IronNet is a cybersecurity company. The company filed bankruptcy on Oct. 12 under Chapter 11 case number 23-11710.

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