CASE SUMMARY: Portable Toilet Provider United Site Services Files Prepack in New Jersey; Debtors Hope to Lure Holdout CastleKnight With Backstop Fees, Exit Funding

Editor’s Note: This story has been revised to add information about the management incentive plan. The prepackaged plan states that 8% of new common shares (on a fully diluted basis) as of the effective date would be reserved for the MIP.

United Site Services, “the largest national provider of portable sanitation services in the United States,” filed for chapter 11, along with several affiliates, today in the U.S. Bankruptcy Court for the District of New Jersey. Yesterday, Dec. 28, the debtors started soliciting votes on a plan that would eliminate more than $2.4 billion of funded debt, provide a $300 million exit term loan facility and raise up to $480 million through an equity rights offering. An ad hoc lender group holding a majority of USS’ secured and unsecured funded debt has committed to providing the exit term loan and fully backstopping the equity rights offering.

The Westborough, Mass.-based firm’s core businesses are portable toilets and hand sanitation services. The company says it was forced to seek bankruptcy protection in light of depressed construction activity and rising costs despite carrying out a 2024 double-dip liability management transaction.

The prepackaged plan, which reflects a Dec. 28 restructuring support agreement with the ad hoc group, equity sponsor Platinum Equity, and asset-backed and revolving lenders, would make the ad hoc group the majority owner of the reorganized company. A governance term sheet attached to the RSA indicates significant equityholders in the reorganized company that could select the board of managers include Clearlake, Searchlight, Apollo, Oaktree, Canyon and Sixth Street.

The ad hoc group has agreed to the equitization of the second-out term loans (of which it holds more than 92%) and not to seek recovery on account of the second-out loans against a debtor that holds a large intercompany claim. The ad hoc group would also fully backstop a $120 million new-money DIP term loan facility to be funded in two draws: $62.5 million after interim DIP approval and an additional $57.5 million after final approval.

Participation in the DIP facility would be offered on a pro rata basis to all holders of the first-out term loans, first-out revolving loans and prepetition first-out notes as well as the amended term lenders (who would be permitted to participate in up to 1.78% of the DIP commitments). The debtors also highlight that existing banks would provide a $195 million five-year ABL credit facility and a separate $100 million five-year revolving credit facility to support go-forward operations.

The debtors say the plan is supported by more than 75% of voting creditors, but one holdout is CastleKnight Management LP, “which USS understands is the largest holder of the Amended Term Loans, Third-Out Notes, and Amended Unsecured Notes,” according to the first day declaration of Chris Kelly of Alvarez & Marsal, USS’ financial advisor. He notes that CastleKnight was one of the few institutional creditors to opt out of the company’s 2024 recapitalization.

USS “believes that CastleKnight intends on pursuing a path of delay and litigation,” including challenging the plan, according to Kelly. Specifically, USS is “concerned that CastleKnight wishes to capitalize off the Debtors’ bankruptcy by using litigation threats concerning the 2024 Recapitalization (even though, as USS believes, CastleKnight has since acquired debt issued in the 2024 Recapitalization).”

Kelly says the debtors “cannot permit a single minority holder of prepetition indebtedness to extract undeserved value through litigation delay” and cannot risk losing the significant value that the ad hoc group would deliver under the plan and RSA.

The debtors, however, also say there is still an opportunity to reach consensus with CastleKnight: not only does the RSA “respect CastleKnight’s rights as a holder of secured and unsecured debt and avoid additional dilutive recoveries by other holders on account of new guarantees granted in the 2024 Recapitalization,” according to Kelly. He says the RSA also permits USS to offer to CastleKnight the opportunity to participate in the DIP backstop, ERO backstop and exit facility “on identical economic terms” as the ad hoc group (emphasis added).

USS “intends to promptly make this offer to CastleKnight” and keep it open for “several days,” Kelly says (emphasis added). The ERO backstop commitment agreement allows the debtors to offer backstop rights to any new commitment party during the five days after the beginning of solicitation on the plan.

In broad strokes, the plan would restructure the company’s debt as follows:
 Holders of ABL facility claims would be paid in full in cash, subject to the debtors’ option to cash collateralize or find an alternative treatment for undrawn ABL letters of credit;
 
Holders of allowed first-out revolving loans claims and allowed first-out term loans/notes claims would be fully paid in cash;
 
Holders of allowed first lien secured claims (i.e., second-out claims and amended term loan claims) would receive – after giving effect to turnover provisions in applicable intercreditor agreements – their share of $419.5 million in cash, 100% of new common shares after accounting for the equity rights offering equity, ERO backstop premium shares and a management incentive plan, and subscription rights for the $480 million exit equity rights offering;
 
Trade and other nonfunded debt creditors would remain unimpaired by the plan;
 
Under a settlement between the ad hoc group and Platinum, $5.5 million of the ERO amount would be used by the commitment parties to purchase 100% of the outstanding equity interests in nondebtor PECF USS Holding Corp. from Platinum, which would prevent deconsolidation of USS’ federal income tax group that could otherwise lead to “significant cash tax liability” for the reorganized debtors.

The debtors say they need to run a “quick and efficient restructuring process,” proposing a plan confirmation hearing around Feb. 10, 2026. USS’ RSA and DIP milestones require the debtors to achieve plan confirmation by Feb. 27 and go effective by March 14.

The first day hearing is scheduled for Dec. 30 at 10 a.m. ET.

The case has been assigned to Judge Michael Kaplan (case No. 25-23630). The debtors are advised by Milbank as bankruptcy counsel, Cole Schotz as local counsel, PJT Partners as investment banker, Alvarez & Marsal as financial advisor and Verita Global as noticing and claims agent.

Prepetition Capital Structure
 

PECF USS Holding Corp., which directly or indirectly holds all equity interests in each debtor and is the parent of the consolidated group, is owned by funds controlled by Platinum.

Restructuring Milestones / Confirmation and ERO Timeline

The RSA sets forth the following milestones:
 Jan. 1, 2026 (three days after petition date): Entry of interim DIP order;
 
Feb. 2 (35 days after petition date): Entry of final DIP order;
 
Feb. 27 (60 days after petition date): Entry of final order confirming the plan, approving the DS and approving the ERO backstop agreement; and
 
March 14 (75 days after petition date): Effective date.
 
The debtors propose the following confirmation timeline:
 On or about Jan. 23 (seven days before confirmation objection deadline): Filing of plan supplement;
 
Jan. 30 at 4 p.m. ET: Voting deadline, deadline to object to plan confirmation and DS approval, and deadline for nonvoting holders to opt out of nondebtor release;
 
On or about Feb. 6: Deadline to file confirmation brief, replies; and
 
On or about Feb. 10 at 10 a.m. ET: Combined hearing on plan confirmation and DS approval.
 
USS also proposes the following schedule for the ERO:
 Jan. 16: Record date;
 
Jan. 22: Rights offering commencement; and
 
Feb. 12: Rights offering expiration.
 
Background / Events Leading to Bankruptcy Filing

Westborough, Mass.-based United Site Services, or USS, was established in 2000 with the acquisition of Handy House, a single service provider located in Foxboro, Mass. The company’s primary business is portable sanitation. Since its inception, the company has employed a strategy of acquiring existing local service providers and rolling them into the broader platform and had completed 134 acquisitions by 2017, when private equity firm Platinum purchased USS.

The company owns approximately 350,000 portable restrooms, which it says “range from plastic single-user units to luxury mobile trailers with running water, electricity, and air conditioning.” Portable sanitation services are the company’s “core” business, making up more than 70% of revenue, and the construction industry is the company’s largest source of customers.

In addition to USS’ core restroom and hand hygiene services, the debtors conduct a range of complementary services, such as temporary fences, crowd control barricades, roll-off dumpsters, modular storage and temporary power sources. The debtors say they also offer nonhazardous liquid waste removal services, pumping and hauling high volumes of liquid waste from commercial settings.

The company attributes the bankruptcy filing to a misalignment of market projections to performance and depressed construction activity in 2024. However, the debtors’ business began facing challenges in 2022, according to the first day declaration, primarily because of inflation, which increased operating costs, along with a decrease in construction activity for some of the company’s largest markets, which contributed to a sizable reduction in USS’ service volume and revenue.

The cascading effects of these difficulties led to an erosion of the company’s profitability, liquidity and overall financial performance, ultimately hindering the debtors’ ability to service their debt and maintain operations by 2024, Kelly says.

In early 2024, the company retained PJT Partners and Milbank to explore options to address its financial issues and obtain new capital to support the ongoing operational turnaround. The advisors engaged with an ad hoc group of “pre-transaction” secured loans while also considering raising financing from third parties.

Kelly says that negotiations with holders of a majority of the pre-transaction secured loans – the “2024 ad hoc group,” which included some members of the current ad hoc group – on a transaction were “progressing constructively.” However, the company’s liquidity needs required it to pivot away from the transaction and focus on bridge financing instead. In the end, Platinum offered to provide bridge financing of an initial $30 million term loan plus a $20 million delayed-draw term loan on “terms highly favorable” to the debtors.

In July 2024, the debtors and the 2024 ad hoc group reached an agreement on the final terms of the 2024 recapitalization with the support of holders of over 97% of the pre-transaction amended term loans, over 75% of the pre-transaction amended unsecured notes, 100% of the ABL facility and 100% of pre-transaction revolving credit facility loans.

The debtors say the 2024 recapitalization was “structured in two phases,” with the first phase closing on Aug. 22, 2024, at which time the bridge facility was repaid in full and terminated. The first phase consisted of the exchange of debt held by the 2024 ad hoc group members into the 2024 first lien facilities.

The debtors say the 2024 ad hoc group was entitled to exchange its pre-transaction amended term loans and amended unsecured notes at “more favorable discounts relative to lenders and noteholders participating in the second phase of the transaction,” on account of the 2024 ad hoc group’s “substantial work and engagement” and consent to make necessary amendments to successfully structure the recapitalization.

The second phase of the transaction was open to all holders of pre-transaction amended term loans and amended unsecured notes and holders of more than 97% of the outstanding principal of the pre-transaction amended term loans, and more than 75% of the face value of the amended unsecured notes participated. Kelly points out that CastleKnight refused to participate.

Notwithstanding the successful recapitalization, the market underperformed projections and construction activity was further depressed, “dampening” the increased liquidity and extended maturities realized from the 2024 recapitalization, according to the debtors. This led the company to negotiate a balance sheet restructuring with its main creditors – the ad hoc lender group represented by Akin Gump and Centerview. The lenders under the first-out/second-out credit agreements and the ABL facility agreed to forbear from exercising remedies on account of defaults from the debtors’ nonpayment, which agreements were extended several times.

The debtors say they negotiated with CastleKnight, facilitating the exchange for eight proposals between the ad hoc group and the lender, but the groups were “too far apart” to reach an agreement prior to the chapter 11 commencement date.

The stakeholder negotiations produced the RSA, supported by “every significant constituency in the capital structure, namely, the members of the Ad Hoc Group, the RCF and ABL lenders, and Platinum.” The debtors say they have “[kept] open the possibility of achieving a global deal,” by retaining the ability to offer CastleKnight the right to join the RSA and participate in the contemplated transactions on a pro rata basis on the same economic terms as the ad hoc group. “USS intends to promptly make this offer to CastleKnight and to leave the offer open for several days as permitted under the RSA,” Kelly notes.

The first day declaration includes the corporate organizational chart below:
 

The debtors’ largest unsecured creditors are as follows: 
10 Largest Unsecured Creditors
Creditor
Location
Claim Type
Amount
UMB Bank NA
New York
Amended First Lien
Term Loan
Undetermined
Bank of America NA
Charlotte, N.C.
Second-Out Loans
Undetermined
Wilmington Trust NA
Wilmington, Del.
Third-Out Notes
Undetermined
Wilmington Trust NA
Wilmington, Del.
Unsecured Notes
$   133,000,000
Satellite Industries Inc.
Plymouth, Minn.
Trade
8,820,029
Penske Truck Leasing Co.
Reading, Pa.
Trade
4,959,143
Alix Partners LLP
Southfield, Mich.
Trade
4,104,238
Enterprise FM Trust
St. Louis
Trade
1,254,439
LUX Facilities
Hollister, Mo.
Trade
892,979
Sunbelt Rentals Inc.
Raleigh, N.C.
Trade
749,757

The case representatives are as follows: Representatives
Role
Name
Firm
Location
Debtors’ Co-Counsel
Dennis F. Dunne

Samuel A. Khalil

Matthew Brod

Lauren C. Doyle

Benjamin M. Schak
Milbank
New York
Debtors’ Co-Counsel
Michael D. Sirota

Felice R. Yudkin

Daniel J. Harris
Cole Schotz
Hackensack, N.J.
Debtors’ Investment
Banker
Avi Robbins
PJT Partners
New York
Debtors’ Financial
Advisor
Chris Kelly
Alvarez
& Marsal
New York
Co-Counsel to the
Ad Hoc Group
Scott L. Alberino
Akin Gump
Washington
Zach Lanier
Dallas
Co-Counsel to the 
Ad Hoc Group
John W. Weiss
Pashman Stein
Holmdel, N.J.
Financial Advisor
to the Ad Hoc Group
NA
Centerview
Partners
NA
Counsel to the DIP 
Agent
Kurt Gwynne

Cameron Capp
Reed Smith
Wilmington, Del.
Counsel to the Prepetition
First-Out / Second-Out 
Agent and the Prepetition
ABL Agent
Joel Moss

Jordan Wishnew
Cahill Gordon
& Reindel
New York
Counsel to Clearlake 
Capital Group
Steven N. Serajeddini

Nicholas Adzima
Kirkland & Ellis
New York
Counsel to the
Fronting Lender
NA
Katten
Muchin
Rosenman
NA
U.S. Trustee
Jeffrey M. Sponder

Samantha Lieb
Office of the
U.S. Trustee
Newark, N.J.
Debtors’ Claims Agent
Evan Gershbein
Verita Global
El Segundo, Calif.

Prepackaged Plan / Disclosure Statement

Classification and Treatment of Claims and Interests

The plan provides the following summary of the classification of claims against and interests in the debtors and class member voting rights:
 

The plan provides the following treatment and projected recoveries for each class of claims and interests:
 Class 1 – Priority nontax claims: Each holder would, at the option of the debtors or the reorganized debtors, either receive payment in full in cash or other treatment consistent with section 1129(a)(9) of the Bankruptcy Code.Projected recovery: 100%
 
Class 2 – Other secured claims: On the effective date or as soon as reasonably practicable thereafter, each holder would receive payment in full in cash, the collateral securing its secured claim, reinstatement or such other treatment rendering its claim unimpaired.Projected recovery: 100%
 
Class 3 – ABL facility claims: On the effective date or as soon as reasonably practicable thereafter, each holder would receive payment in full in cash, provided that undrawn ABL letters of credit would, at the option of the debtors or reorganized debtors and with the consent of the required consenting second-out creditors, be either cash collateralized, supported by “back-to-back” letters of credit under the exit ABL facility or other facility or otherwise treated in a manner acceptable to the issuer.Projected recovery: 100%
 
Class 4 – First-out revolving loans claims: On the effective date or as soon as reasonably practicable thereafter, each holder would receive payment in full in cash.According to the plan, this treatment “reflects the effectuation of the turnover provisions of the applicable Intercreditor Agreements.”
Projected recovery: 100%
 
Class 5 – First-out term loan/notes claims: On the effective date or as soon as reasonably practicable thereafter, each holder would receive payment in full in cash.According to the plan, this treatment “reflects the effectuation of the turnover provisions of the applicable Intercreditor Agreements.”
Projected recovery: 100%
 
Class 6 – First lien secured claims: Each holder would receive, “prior to giving effect to the turnover provisions in the applicable Intercreditor Agreements,” a pro rata share of the “First Lien Secured Claims Recovery,” the “Distributable New Common Shares” and the “Subscription Rights.”The plan defines “First Lien Secured Claims Recovery” as $419,485,424 in cash.
The plan defines “Distributable New Common Shares” as 100% of new common shares after issuance of the equity rights offering equity, equity rights offering backstop premium shares and shares funded into the management incentive plan.
“Subscription rights” means rights to participate in the $480 million exit equity rights offering (discussed more fully below).
After giving effect to the turnover provisions in the intercreditor agreements, on the effective date holders of second-out claims would receive no cash, 98.22% of new common shares and 98.22% of the subscription rights.
After giving effect to the turnover provisions in the intercreditor agreements, on the effective date holders of amended term loan claims would receive approximately $10.5 million in cash, 1.78% of new common shares, and 1.78% of the subscription rights.
Projected recovery: 27% prior to giving effect to the turnover provisions of the intercreditor agreements.
 
Class 7 – Unsecured funded debt claims: On the effective date or as soon as reasonably practicable thereafter, each holder would receive its pro rata share of the “Unsecured Funded Debt Claim Recovery.”The plan defines “Unsecured Funded Debt Claim Recovery” as $5 million in cash.
Projected recovery: 0.3%
 
Class 8 – General unsecured claims: On the effective date or as soon as reasonably practicable thereafter, each holder would be paid in full in cash or otherwise receive treatment consistent with section 1129(a)(9) of the Bankruptcy Code.Projected recovery: 100%
 
Class 9 – Intercompany claims: On the effective date or as soon as reasonably practicable thereafter, each intercompany claim would be either (i) reinstated, adjusted, converted to equity, set off, settled, distributed or contributed, or (ii) discharged, canceled and released, as reasonably determined by the reorganized debtors.Projected recovery: 0% or 100%
 
Class 10 – Intercompany interests: On the effective date or as soon as reasonably practicable thereafter, each intercompany claim would be adjusted, reinstated or canceled, as reasonably determined by the reorganized debtors.Projected recovery: 0% or 100%
 
Class 11 – Existing interests: If the “Reorganized Parent” is a direct or indirect non-debtor parent of USS Parent or another entity that would directly or indirectly own all assets of USS Parent, then holders of existing equity interests would receive no recovery or distribution and existing equity would be reinstated solely to maintain the corporate ownership of USS Parent as contemplated by the plan.If the Reorganized Parent is USS Parent, then existing equity interests would be discharged on the effective date and holders would not receive any distribution.
Projected recovery: 0%
 
Class 12 – Subordinated claims: Subordinated claims would be discharged on the effective date and holders would not receive any distribution.Projected recovery: 0%
 
DIP claims are not classified and would be paid in full in cash using the proceeds of the senior secured term loan exit facility.

Exit Term Loan Facility Term Sheet

According to a term sheet attached to the RSA and the DS, members of the ad hoc group (based on their second-out term loan holdings) and “certain other Consenting Creditors who have been offered the ability to participate” would provide the debtors with a seven-year $300 million senior secured term loan exit facility.

The exit facility would be used to pay transaction costs, fees and expenses; refinance the DIP loans; refinance first-out revolving loans, first-out term loans, first-out notes and ABL loans; make the amended term loan cash payment and other distributions under the plan; and “for working capital and general corporate purposes.”

The exit term facility would be secured by junior liens on exit ABL facility collateral pursuant to an intercreditor agreement and first priority liens on all other assets, provided the exit RCF facility would be established on a “first out” basis pursuant to an intercreditor agreement.

The exit term facility would bear interest at SOFR+6.5% per annum, with a 2% SOFR floor and a 2% default premium, provided that if interest is paid in kind for any portion of the loans in any interest period, interest for that period would increase to SOFR+7.5% per annum. During the first year after the effective date, all interest would be payable in kind unless the debtors elect to pay any portion in cash.

After the first year, all interest would be payable in cash, provided that if projected pro forma liquidity after taking into account the payment of all of interest in cash would be less than $100 million, then 50% of the nondefault interest payable for the applicable period would be payable in kind.

Some 50% of excess cash flow and 100% of proceeds from non-ordinary course sales or other non-ordinary course dispositions of assets must be used to pay the loans.

The term sheet provides for a “customary make whole” if the loans are paid between 90 days after the effective date and one year after the effective date and a 1% premium if the loans are repaid between the first and second anniversary of the effective date.

The term sheet also provides for a possible $25 million incremental facility “to finance permitted acquisitions and other permitted investments,” subject to a specified net leverage ratio.

The exit term facility term sheet provides for a 3% upfront premium and a confidential agency fee.

Equity Rights Offering

The plan contemplates an equity rights offering of up to $480 million at a 27.5% discount to plan equity value. Holders of second-out claims and amended term loan claims would be able to purchase a pro rata percentage of the rights offering shares.

The rights offering would be backstopped by the “ERO Backstop Parties” pursuant to a backstop commitment agreement attached to the RSA. The debtors may offer the backstop rights to any new commitment party during the five days after the beginning of solicitation on the plan. Backstop parties would receive a backstop premium equal to 8% of rights offering shares and are guaranteed a 30% direct investment in the rights offering.

Management Incentive Plan

Within 120 days after the effective date, the board of the reorganized parent would adopt a management incentive plan. 8% of new common shares (on a fully diluted basis) as of the effective date would be reserved for the MIP.

Releases and Exculpation

The plan provides for releases of the debtors, reorganized debtors, consenting stakeholders, the first-out notes trustee, first-out/second-out agent, ABL agent, intercompany credit agreement agent, DIP agent and DIP lenders, exit term loan parties, exit RCF facility parties, exit ABL facility parties, ERO backstop parties, sponsor Platinum and their respective related parties. However, holders of claims or interests that object to the plan, opt out of the nondebtor release or are listed in the retained causes of action schedule would not be released parties.

Additionally, the plan would exculpate the debtors, reorganized debtors and their current and former directors, managers and certain advisors that served between the petition date and effective date.

Governance Term Sheet

The company’s board of managers would initially have nine managers with an initial two-year term from the effective date, as follows:
 Clearlake would be entitled to appoint three managers so long as it continues to hold 30% of outstanding equity of the company, two managers so long as it holds at least 15% but less than 30%, and one manager so long as it holds at least 10% but less than 15%. Additionally, so long as Clearlake is entitled to appoint at least three managers, it would also be entitled to select the chair of the board. The board chairman would thereafter be selected by a majority of the major holder managers.
 
Searchlight would be entitled to appoint two managers so long as it continues to hold at least 15% of outstanding equity interests of the company and one manager so long as it continues to hold at least 10% but less than 15%.
 
Apollo would be entitled to appoint one manager so long as it continues to hold at least 10% of outstanding equity interests of the company.
 
Oaktree, Canyon and Sixth Street would collectively be entitled to appoint two managers so long as they continue to hold at least 15% of outstanding equity interests and one manager so long as they continue to hold at least 10% but less than 15%, provided that at least one such manager would be an independent director under NYSE rules. The independent director would be required to resign in the event Oaktree, Canyon and Sixth Street lose the right to appoint two managers.
 
One manager would be the CEO.
 
Financial Projections

The debtors provide the following summaries of their consolidated financial projections through 2029 in an exhibit to their disclosure statement:
 
 
 

Valuation Analysis

On the basis of the financial projections, investment banker PJT estimates the reorganized debtors’ enterprise value at $900 million to $1.35 billion (with a midpoint of $1.125 billion) as of the assumed March 31, 2026, effective date. PJT pegs the reorganized debtors’ net equity value on the effective date at $500 million to $950 million (with a midpoint of $725 million), assuming $430 million in debt on emergence ($70 million in exit ABL debt, a $50 million exit superpriority revolving facility and a $310 million exit first lien term loan).

Liquidation Analysis

The debtors provide the following table summarizing their estimated distributable assets in a hypothetical chapter 7 liquidation:
 

The debtors provide the following table comparing recoveries for each class under the plan with recoveries in a hypothetical chapter 7 liquidation:
 

DIP Financing Motion

The debtors propose a $120 million senior secured superpriority term loan facility, to be funded in two draws: $62.5 million after interim DIP approval and an additional $57.5 million after final approval. PECF USS Intermediate Holding III Corp. would be the borrower, all other debtors would guarantee the loans, and Wilmington Savings Fund Society would act as DIP agent. The facility would mature in 12 months, subject to two three-month extensions with the consent of the required DIP lenders.

Participation in the DIP facility would be offered on a pro rata basis to all holders of the first-out term loans, first-out revolving loans and prepetition first-out notes, and to the amended term lenders (who would be permitted to participate up to 1.78% of the DIP commitments). The DIP would be backstopped by the ad hoc group and certain amended term lenders.

The debtors would use DIP proceeds and cash collateral for working general and general corporate purposes, to fund the chapter 11 cases, costs and expenses related to the DIP facility, adequate protection payments for the prepetition secured parties and to obtain new or increased letters of credit.

Cash interest would accrue at SOFR for one-month interest periods (subject to a 2% floor) plus a 7.75% applicable margin per annum, with an additional 2% for the default rate. The backstop lenders would receive a backstop premium of 7.5% of their DIP term loan commitments, payable in kind on the closing date. Fees include a 2% upfront fee, payable in kind, and an agency fee to the DIP agent under a separate fee letter. The DIP would be subject to a $25 million minimum liquidity requirement, tested at the end of each calendar week.

Subject to the carveout and permitted liens, the DIP agent would receive first-priority liens on unencumbered assets, junior liens on assets subject to permitted liens (including ABL priority collateral, on which DIP liens would be junior to the prepetition ABL liens), and first-priority priming liens on prepetition collateral other than ABL priority collateral.

Upon entry of the final order, liens would also attach to the proceeds of avoidance actions. DIP obligations would constitute superpriority administrative expense claims, subject to the carve-out, and the DIP liens would be deemed valid and conclusively perfected upon entry of the interim DIP order.

The debtors provide the following summary of lien priorities on DIP collateral:
 
(Click HERE to enlarge.)

The company summarizes the adequate protection it proposes to give the prepetition secured parties as follows:
 
 
(Click HERE to enlarge.)

The debtors would also pay reasonable and documented pre- and postpetition fees and expenses of the prepetition ABL agent, the prepetition first-out/second-out agent, the ad hoc group and their respective advisors. Until the prepetition ABL facility obligations (including any administrative expense claims granted in favor of the prepetition ABL secured parties) are paid in full in cash, adequate protection 507(b) claims other than the ABL adequate protection 507(b) claims would not be payable from the ABL priority collateral.

Additionally, the debtors would pay reasonable and documented fees and expenses of the DIP agent, DIP lenders and certain prepetition secured parties.

The debtors propose a waiver of the estates’ right to seek to surcharge collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b).

The post-termination carve-out for professional fees is $6 million.

The proposed budget for the use of the DIP facility is HERE. The DIP milestones align with the RSA milestones.

The lien challenge deadline is the earlier of 75 days after entry of the interim DIP order or the confirmation objection deadline. The UCC lien investigation budget is $75,000.

In support of the proposed DIP financing, the debtors filed the declaration of Avram Robbins of investment banker PJT Partners. Robbins says that in parallel with negotiations with the DIP lenders, PJT ran a DIP marketing process with potential third-party investors. Starting Nov. 19, PJT contacted 12 third parties but none were interested in providing DIP financing. Robbins adds that the debtors also solicited DIP financing from CastleKnight as part of broader restructuring discussions, entering into a confidentiality agreement with CastleKnight on Oct. 17 and providing it with due diligence. However, CastleKnight did not deliver any DIP proposals, according to Robbins.

Robbins says USS intends to “promptly offer CastleKnight … the opportunity to participate in the DIP Facility on identical economic terms to those offered to the members of the Ad Hoc Group” on account of its amended term loan holdings. This includes the opportunity to backstop the DIP facility for the same consideration, according to Robbins.

Other Motions

The debtors also filed various standard first day motions, including the following:
Motion for joint administration – The cases will be jointly administered under case No. 25-23630.
Motion to use cash management system – The company has bank accounts with JPMorgan Chase, Bank of America and Comerica Bank.
Motion to pay employee wages and benefits – The debtors say approximately $27.5 million of employee compensation and benefits is outstanding as of the petition date. They seek authority to pay about $16.5 million during the interim period.
Motion to pay prepetition trade claims – The debtors estimate approximately $46.8 million of outstanding undisputed trade claims as of the petition date and seek authority to pay up to $37.4 million during the interim period in the ordinary course.
Motion to maintain insurance programs
Motion to maintain customer programs
Motion to pay taxes and fees
Motion to provide utilities with adequate assurance
Motion to file consolidated creditor matrix and seal personal information
Application to appoint KCC LLC, dba Verita, as claims agent