CASE SUMMARY: Dynata Files Prepack With Support From Supermajority of Debt Stack; Plan Would Cut Nearly 40% of Funded Debt, Infuse $81.5M of Liquidity Through DIP and Exit Facilities, Leave GUCs Unimpaired

Plan / Disclosure Statement

Below is a chart of the plan’s classes, along with their impairment status and voting rights:
 

Treatment of Claims and Interests

The debtors’ plan treatment includes the following classification of and proposed distributions to holders of allowed claims and interests:
 

• Unclassified claims:
  • Administrative claims, including professional fee claims, priority tax claims and U.S. Trustee fees would be paid in full in cash.
  • Holders of DIP facility claims would receive a pro rata share of $31.5 million of the first-out converted term loans and the first-out new-money term loans.
• Class 1 – Other secured claims: Holders would either receive payment in full in cash, reinstatement or other treatment sufficient to render their claims unimpaired.
  • Projected recovery: 100%
• Class 2 – Other priority claims: Holders would receive payment in full in cash or other treatment sufficient to render their claims unimpaired.
  • Projected recovery: 100%
• Class 3A – First lien term loan claims: Holders would receive a pro rata share of:
  • An option to fund the first-out new-money term loans;
  • The second-out take-back term loans;
  • 95% of reorganized equity, subject to dilution by the MIP (up to 11% of new common stock) and the new warrants (for up to 12.5% of new common stock); and
  • $11.67 million in cash.
  • The $81.5 million first-out term loans facility would consist of $50 million in new-money exit term loans and $31.5 million in converted DIP facility claims.
  • The first lien holders’ equity share may be increased if holders of revolving loan claims elect to receive additional incremental take-back loans.
  • The $694 million second-out take-back term loan facility is subject to a 5% increase if revolving loan creditors elect to receive loans in lieu of their pro rata share of reorganized equity.
  • Allowed amount: Approximately $920.77 million in principal plus accrued interest, fees and other amounts owing under the prepetition credit agreement.
  • Projected recovery: TBD
• Class 3B – Revolving credit loan claims: Holders would receive a pro rata share of:
  • An option to fund the first-out new-money term loans;
  • The second-out take-back term loans;
  • 95% of reorganized equity, subject to dilution by the MIP (up to 11% of new common stock) and the new warrants (for up to 12.5% of new common stock); and
  • $11.67 million in cash.
  • In lieu of receiving reorganized equity, holders may receive a pro rata share of the 5% incremental second-out take-back term loan. As a result of the election, the reorganized equity allocation for revolving credit holders would be increased, but the reorganized equity that would otherwise have been distributed to revolving credit holders would be distributed to first lien claimholders.
  • Allowed amount: Approximately $96.9 million in principal plus accrued interest, fees and other amounts owing under the prepetition credit agreement.
  • Projected recovery: TBD
• Class 4 – Second lien term loan claims: Holders would receive a pro rata share of:
  • 5% of reorganized equity, subject to dilution by the MIP (up to 11% of new common stock) and the new warrants (for up to 12.5% of new common stock);
  • The new warrants; and
  • $750,000 in cash.
  • Allowed amount: $250 million in principal plus accrued interest, fees and other amounts owing under the prepetition credit agreement.
  • Projected recovery: TBD
• Class 5 – General unsecured claims: Holders would receive payment in full in cash on the effective date of the plan unless previously paid in the ordinary course of business.
  • Allowed amount: Approximately $158.94 million
  • Projected recovery: 100%
• Class 6 – Intercompany claims: Would be either reinstated or discharged.
  • Projected recovery: 100% or 0%
• Class 7 – Section 510(b) claims: Would be canceled without recovery.
  • Projected recovery: 0%
• Class 8 – Intercompany interests: Would be either reinstated or discharged.
  • Projected recovery: 0%
• Class 9 – Existing equity interests: Would be canceled without recovery.
  • Projected recovery: 0%

Management Incentive Plan

The management incentive plan would provide for the issuance of up to 11% of new common stock, subject to approval of the reorganized board on terms consistent with the RSA.

Other Plan Provisions

The plan provides for releases of the debtors, the sponsors, consenting lenders, the first lien and second lien ad hoc groups, DIP lenders, DIP backstop parties, exit backstop parties, the DIP, first lien and second lien agents and second lien lenders who vote to accept the plan. Holders of claims and interests who object to the plan or opt out would be excluded from the releases.

In addition, the plan includes an exculpation provision in favor of the debtor and related parties, including current and former directors and officers, equityholders and professionals.

DIP Financing Motion / Cash Collateral Motion

The debtors propose to fund the cases with a $31.5 million new-money DIP and consensual use of cash collateral. The entirety of the DIP financing would be available on interim approval. Participation in the DIP would be open to all first lien lenders through a postpetition syndication process. Certain members of the first lien ad hoc group would backstop the syndication; the backstop was offered to all restricted members of the first lien ad hoc group.

The DIP loans would bear interest at SOFR+8.75% annually. The DIP provides for a 3.5% commitment fee, 9% backstop fee and 2% exit fee, each payable in cash.

The DIP would roll into the debtors’ $81.5 million senior secured term loan exit facility, subject to the right of DIP lenders to elect payment in cash. The DIP otherwise matures 75 days after the closing date, subject to customary maturity triggers (including conversion or dismissal of the cases).

Ethan Kopp of Houlihan Lokey, the debtors’ investment banker, says in a supporting declaration that the debtors need the $31.5 million DIP to “comfortably operate their business in the ordinary course postpetition.” Kopp adds that Houlihan Lokey conducted a prepetition marketing process directed at third-party lenders to secure “non-consensual priming” or “junior” unsecured DIP financing, but no third party was willing to provide a DIP on those terms. Kopp also asserts that the DIP is an “essential component” of the RSA, and absent DIP approval, prepetition lenders would not consent to the use of cash collateral.

The proposed budget for the use of the DIP facility is HERE.

The DIP would be secured by a first-priority lien on substantially all of the debtors’ assets.

The company proposes customary adequate protection for the DIP lenders, including replacement liens, superpriority claims, and payment of reasonable and documented fees and expenses.

In addition, the debtors propose a waiver of the estates’ right to seek to surcharge the lenders’ 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 $1 million.

The DIP financing milestones mirror the RSA case deadlines, apart from the interim DIP milestone (which uses a “business day” calculation):
 

• Monday, May 27 (three business days after the petition date): Entry of interim DIP order;
   
• June 21 (30 days after the petition date): Entry of final DIP order;
   
• July 6 (45 days after the petition date): Entry of DS and confirmation orders; and
   
• July 11 (50 days after the petition date): Plan effective date.
   

The lien challenge deadline is the earlier of 75 days after entry of the interim DIP order and confirmation of the plan. The UCC investigation budget is $50,000.

Anticipated Emergence Capital Structure

The debtors’ anticipate the following capital structure on emergence:
 

First-Out Term Loan Facility

First lien lenders would provide an $81.5 million four-year first-out term loan facility, which would be used for payment of chapter 11 expenses, working capital and other general corporate purposes. The facility would include $50 million in new money and $31.5 million in converted DIP claims.

The facility would be backstopped by the exit backstop parties – certain members of the first lien ad hoc group – which would receive a 9% backstop fee, payable in cash.

The first-out term loans would be issued with a 1.5% original issue discount, amortize at 1% per annum (payable quarterly) and bear interest at SOFR+5%.

The facility would be secured by a first-priority lien on substantially all of the loan parties’ assets. However, if the company enters into a new ABL facility secured by a first-priority lien on working capital assets, then the first-out lenders would have a second lien on those assets junior to the new ABL lien.

New ABL Facility

The plan anticipates a $75 million exit ABL facility. The facility would be secured by first-priority liens on the working capital assets that secured the existing first lien credit agreement and second-priority liens on all other assets that secured the existing first lien credit agreement.

Second-Out Take-Back Term Loan Facility

Existing first lien lenders would receive a pro rata share of a $694 million second-out take-back term loan facility as partial consideration for their first lien claims.

The take-back facility would bear interest at SOFR+5.5% and mature 4.25 years from the effective date. The loans would amortize at 1% annually, payable quarterly.

The take-back facility would be secured by a first-priority lien with second payment priority on all collateral securing the first-out term loan facility. To the extent the company enters into the new ABL facility, the second-out take-back loans would be secured by a second-priority lien with second payment priority on working capital assets.

New Warrants

The five-year new warrants issued to second lien lenders would entitle them to purchase up to 12.5% of reorganized equity at a strike price equal to the value of reorganized equity that would allow holders of first lien claims to receive a par plus accrued interest recovery on the total value of the first lien claims. The value of the first-out new-money loan would be added to the enterprise value and equity value calculation.

Valuation Analysis

Investment bankers and financial advisors estimate the enterprise value of the reorganized debtors at $820 million to $1.02 billion, with a midpoint of $920 million, as of the assumed effective date of June 30. Houlihan Lokey adds that assuming net debt of approximately $745 million as of the assumed effective date, the implied equity value range of the reorganized debtors would range from $75 million to $275 million, with a midpoint of $175 million.

Financial Projections

The debtors provide the following projected statement of operations through 2027:
 

The debtors provide the following projected balance sheet through 2027:
 

The debtors provide the following cash flow projections through 2027:
 

Liquidation Analysis

The debtors provide the following analysis of recoveries under the plan:
 

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. 24-11057.
• Motion to establish trading procedures
  • The debtors seek to establish trading procedures for the common stock of New Insight Holdings Inc. to be able to object to and prevent transfers if necessary to preserve net operating losses. The debtors estimate they have approximately $412 million in NOLs.
• Motion to pay prepetition employee wages and benefits
  • The debtors seek authority to pay up to $3.4 million in prepetition workforce obligations on an interim basis and $8.1 million on a final basis.
• Motion to use cash management system
  • The company has bank accounts with Wells Fargo & Co. and Western Alliance Bank.
• Motion to maintain insurance programs
• Motion to pay prepetition taxes and fees
  • The debtors seeks authority to pay up to a $78,000 in prepetition taxes and fees, the amount projected to become due within the first 21 days of the bankruptcy. The debtors estimate that they owe approximately $140,000 in prepetition taxes.
• Motion to continue customer programs
  • The motion seeks authority to maintain the company’s preexisting customer rebate programs. The debtors estimate they have approximately $4.4 million of prepetition customer obligations with $1 million potentially coming due within the first 21 days of the bankruptcy.
• Motion to provide utilities with adequate assurance
• Motion for order enforcing and restating automatic stay for foreign creditors
• Motion to pay prepetition trade claims
  • The debtors seek authority to pay prepetition ordinary course vendor claims, foreign vendor claims and shipping claims of up to $16.5 million on an interim basis. The debtors estimate that they owe approximately $37.2 million in outstanding vendor and shipping claims.
• Motion to file consolidated list of creditors
• Application to appoint Kroll Restructuring as claims agent