Feb. 10, 2009 – This case already is being closely followed by the automaker customers of Fluid Routing Solutions. Three notices of appearance have been filed – counsel to Ford Motor Company, counsel to Toyota Motor Engineering & Manufacturing North America, Inc. and counsel to Chrysler LLC. An even stronger demonstration of automaker interest is the attendance at Monday mornings’ hearing (February 9, 2009) of counsel for both Chrysler and Toyota.
We would expect that the automakers do not want to see a repeat of the disaster that occurred with Cadence Innovation LLC, where Chrysler and GM ended up in a race to see who could pull their tooling first, and Cadence was left with no alternative but a straight liquidation. While they would never admit it, the automakers are probably monitoring each other as closely as they are monitoring Fluid Routing Solutions to make sure that no one makes any sudden moves.
Counsel to International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) has also made an appearance. The UAW has about 350 union members employed by Fluid Routing Solutions.
Late afternoon on Monday, February 9, 2009, an interim order was docketed approving the first day motion for DIP financing. We had not mentioned that motion for DIP financing in earlier posts. It deserves a brief mention here.
Debtor-in-possession financing is being provided by Sun Fluid Routing Finance, LLC (“Sun Finance”) an affiliate of Sun Capital Partners, Inc. (“Sun Capital”), a leading private investment firm. Fluid Routing Solutions is the result of an investment set up by Sun Capital in May, 2007, less than 2 years ago.
The stated purpose of the Sun Finance DIP financing is to enable a sale and “a structured liquidation in chapter 11 that will enable the Debtors to conduct a wind-down process that will repay the Debtors’ secured debt, and may also generate a return to other creditors.” The funds will be used by Fluid Routing Solutions to enable it “to meet ongoing operational expenses while in chapter 11 and implement an orderly liquidation of their remaining assets for the benefit of creditors.”
The amount of the Sun DIP financing is capped at $12 million. A portion of that amount will be used to pay the pre-petition first priority secured lenders. The Sun Finance DIP is granted a superpriority administrative claim and a secured first-priority security interest in all of the debtors’ assets.
The DIP financing will be split into a Loan A and a Loan B with Loan A bearing interest at 12.5% per annum and Loan B at 15% per annum.
There is also a fixed maturity date of 120 days following the petition date, which we calculate as June 6, 2009.
There are several really nifty features in this DIP financing that you would not see in institutional DIP financing. They have nothing to do with suppliers so we won’t discuss them here other than to say that motivations are built in everywhere to see that this sale and liquidation speeds along without a hitch.
For those suppliers who have been through a customer bankruptcy before, don’t let your prior experience mislead you. One of the things that would typically slow things down is institutional DIP financing. But here there is affiliated DIP financing. As we said before, the train has left the station and it is moving like a bullet.
We expect a brief pause in the flurry of activity for a couple of days as Fluid Routing Solutions regroups and the rest of the world tries to catch up.