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CASE SUMMARY: Multi-Color Files ‘Straddle’ Prepack Supported by 72% of Secured Lenders, Sponsor CD&R; Plan Would Reduce Debt by $3.9B, Provide $889M in Equity Investment

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Multi-Color Corp., a Cincinnati-based label manufacturer, and more than 50 affiliates filed a “straddle” prepackaged chapter 11 early this morning in the Bankruptcy Court for the District of New Jersey to implement a restructuring support agreement supported by holders of approximately 72.3% of cash flow revolving debt, U.S. term loans, European term loans and secured notes, plus equity sponsor CD&R.

According to the debtors, the prepackaged plan would reduce the company’s debt to approximately $2 billion from approximately $5.9 billion. The plan provides for $889 million in new common and preferred equity investment ($489 million available to first lien creditors and $400 million from CD&R), and on emergence the debtors would have more than $500 million of liquidity. The debtors also secured at least $250 million in new-money DIP financing.

Under the plan and on account of the secured portion of their claim, Class 4 first lien creditors would share in the $489 million new preferred equity investment, $1.57 billion in new term loans, $200 million in cash, new seven-year new warrants convertible into 9% of new common equity, 10.35% of new preferred equity (subject to dilution by a management incentive plan, or MIP, funded with an undetermined share of new equity and the new warrants) and 13.3% of new common equity (also subject to dilution by the MIP and the new warrants).

Class 5 junior funded debt claims, which the plan defines as “First Lien Deficiency Claims and Unsecured Notes Claims,” would share $57.5 million in cash and 5% of new common equity (subject to dilution by the MIP and new warrants). The DS estimates a 2.6% to 2.8% recovery for this class (including the entirety of unsecured notes claims). As reported, sources have estimated the blended recovery rate for first liens at around 45% (inclusive of the Class 4 recovery).

Class 6 general unsecured creditors would ride through unimpaired. Existing equity interests would be canceled.

Investment banker Evercore estimates the total enterprise value of the reorganized debtors at between $2.9 billion and $3.4 billion on emergence, assuming an effective date of May 31. Assuming debt of $2.6 billion on emergence, the investment banker estimates the reorganized debtors’ equity value at between $300 million and $800 million.

The debtors commenced solicitation of votes on the plan on Jan. 27; solicitation of votes will continue postpetition.

Octus’ Private Company Analysis team has produced a report based on documents available to the lenders of the company on their respective data site. Information on how to request access for lenders and parties confidential on the deal is available HERE.

The debtors seek approval of an up to $657.5 million DIP financing facility from first lien lenders featuring $250 million of new money, a $250 million rollup of prepetition first lien debt, a $7.5 million DIP backstop premium and up to $150 million in additional new-money loans. The new-money DIP loans would be paid in full on emergence, with the rollup DIP loans exchanged for new debt.

The DIP loans would be backstopped by plan sponsor CD&R and certain members of the secured ad hoc group, and 30% of the DIP commitments would be allocated to the DIP backstop parties on a pro rata basis. All first lien lenders can participate in the DIP facility and are entitled to fund 70% of the DIP commitments.

In addition, the debtors, DIP lenders and the prepetition ABL lenders agreed to the consensual use of cash collateral.

According to the first day declaration of Chief Restructuring Officer Garrett Gabel, a crossover ad hoc group consisting primarily of unsecured noteholders made an alternative restructuring proposal in late January 2026 that would have reduced debt by approximately $450 million and given the debtors a two-year liquidity and maturity runway.

The debtors also rejected a proposal from the crossover group for a $350 million to $500 million new-money DIP facility secured by a junior lien on ABL collateral and by a first lien on the debtors’ unencumbered property because it was not supported by senior lenders and did not include a viable restructuring plan.

“Although the Crossover Ad Hoc Group does not presently support the restructuring” proposed in the plan, “the Debtors intend to continue negotiations with them during chapter 11 to try to build additional consensus,” the DS provides.

The first day hearing has been scheduled for Friday, Jan. 30, at 1 p.m. ET.

The case has been assigned to Judge Michael B. Kaplan (case No. 26-10910). The debtors are represented by Kirkland & Ellis and Cole Schotz as counsel, Evercore as investment banker and AlixPartners as financial advisor. The debtors’ special board committee is represented by Quinn Emanuel.

The secured ad hoc group is represented by Milbank as counsel, PJT Partners as investment banker and Alvarez & Marsal as financial advisor. CD&R is represented by Debevoise & Plimpton and Latham & Watkins as counsel and Moelis as investment banker.

RSA Milestones

The RSA includes the following milestones:

  • Feb. 3 (three business days after the petition date): entry of interim DIP order;
  • March 5 (35 days after the petition date): entry of final DIP order;
  • March 30 (60 days after the petition date): entry of orders confirming plan and approving new debt and backstop commitment agreement; and
  • April 29 (90 days after the petition date): effective date (subject to 30-day extension for regulatory approvals).

Confirmation Timeline

The debtors’ confirmation scheduling motion proposes the following confirmation timeline:

  • Jan. 15: voting record date;
  • Jan. 27: commencement of solicitation;
  • On or about Feb. 24: initial plan supplement filing deadline;
  • March 2: new preferred equity subscription commencement date;
  • March 3 at 5 p.m. ET: voting and confirmation objection deadline;
  • March 17: combined DS approval and plan confirmation hearing; and
  • March 20 at 5 p.m. ET: new preferred equity subscription participation deadline.

Prepetition Capital Structure

The company’s prepetition capital structure includes the following:

The debtors’ obligations under the ABL facility are guaranteed by (i) LABL Acquisition Corp., (ii) each direct and indirect wholly owned U.S. restricted subsidiary of the parent entity that is not a U.S. borrower, (iii) each U.S. borrower (other than with respect to its own primary obligations), (iv) with respect to the French sub-facility and subject to local law limitations, each direct and indirect wholly owned French restricted subsidiary of the parent entity that is not a French borrower, (v) with respect to the French and global sub-facilities (other than borrowings by a U.S. borrower under the global sub-facility) and subject to local law limitations, all direct and indirect wholly owned Australian, Belgian, Canadian, English, German, Irish, Mexican, New Zealand, Polish and Scottish restricted subsidiaries that are not a non-U.S. borrower, and (vi) each non-U.S. borrower other than the French borrower.

The ABL facility is secured by liens on substantially all the assets and property of the borrowers and guarantors, including first-priority liens on the ABL priority collateral, which includes certain of the accounts receivable and inventory of the debtors and the other borrowers and guarantors thereunder, and a second-priority lien on the cash flow priority collateral.

The debtors’ obligations under the cash flow revolving facility, the U.S. term loan facility and the European term loan facility are guaranteed by (i) LABL Acquisition Corp., (ii) each direct and indirect wholly owned U.S. restricted subsidiary of the parent entity that is not a U.S. borrower, and (iii) each U.S. borrower (other than with respect to its own primary obligations).

The cash flow revolving facility, the U.S. term loan facility and the European term loan facility are secured by liens on substantially all the assets and property of the borrowers and guarantors, including first-priority liens on the cash flow priority collateral (on a pari passu basis with the liens securing the senior secured notes) and second-priority liens on the ABL priority collateral.

The senior secured notes are secured by liens on substantially all the assets and property of the applicable guarantors, including first-priority liens on the cash flow priority collateral (on a pari passu basis with the liens securing the cash flow facilities) and second-priority liens on the ABL priority collateral.

As of the petition date, the debtors owed approximately $56 million of the equipment finance leases, $66 million building finance leases, $32 million under a first master lease agreement and $72 million under a second master lease agreement.

According to Octus’ CLO database, Fortress Investment Group was the largest holder of the U.S. term loan, holding $65.7 million, and BlackRock Financial Management Group was the largest holder of the European term loan, holding €12.1 million.

(Click HERE to enlarge.)

The debtors’ organizational structure is below:

(Click HERE to enlarge.)

Background / Events Leading to Bankruptcy Filing

Operational Background

According to the first day declaration of CRO Gabel, the debtors are “the leading global manufacturer in prime (i.e., the primary label on any product intended to showcase the product and underlying brand) label solutions.”

Headquartered in Atlanta, the company operates in more than 25 countries with over 90 facilities, including 39 in North America. The company employs approximately 12,800 people worldwide, including approximately 4,870 in the U.S.

The company’s business includes six key product label solutions:

  • Pressure sensitive – approximately 45% of revenue: These labels typically consist of a substrate, release coating, adhesive and backing material.
  • Cut & stack – approximately 19% of revenue: Printed on large sheets or rolls, then cut into the applicable product shape.
  • In-mold – approximately 13% of revenue: A label is applied to a plastic container as the container is being formed in the mold cavity.
  • Roll-fed – approximately 9% of revenue: Delivered on a roll without release liners or adhesives; commonly applied to plastic bottles and beverage packaging.
  • Shrink sleeve – approximately 8% of revenue: Manufactured as sleeves, slid over glass or plastic bottles and heated to conform to the contours of the container.
  • RFID – approximately 2% of revenue: RFID-enhanced labeling that enables real-time inventory tracking as well as product authenticity validation and regulatory compliance.

According to Gabel, the company offers five types of print technology: flexography, gravure, offset/lithography, digital and rotary screen.

The company also has an engineering business that “builds optimal application systems to consistently present labeling solutions for its clients,” including “the automation industry’s most sophisticated and reliable labeling applicators and systems.”

Causes of Financial Distress

Although the prime label industry “has enjoyed historic long-term stability,” Gabel says “short-term sector volatility beginning in 2021 caused a series of significant setbacks,” including “rapid, unanticipated cost inflation and significant raw material and labor constraints between 2021 and 2022 due to market and supply chain issues.”

A “sustained period of customer destocking” then caused “significant and unanticipated volume decline in demand,” Gabel continues. “These industry headwinds were further compounded by a challenging macroeconomic environment, including uncertainty around tariffs and customer demand.”

As a result, the company’s revenue declined from approximately $3.6 billion in 2022 to approximately $3.1 billion in 2025:

The company’s efforts to address these issues overlapped with efforts to integrate Fort Dearborn Co., acquired in October 2021, and “subsequent business segment acquisitions.” The company increased prices in 2022 and 2023 and “initiated deep reductions to headcount and inventory,” but “ongoing management turnover and a lack of quality, data-driven insights” contributed to a 14% decrease in revenue from 2022 through 2025.

Since January 2024, current management “upgraded talent,” improved processes and implemented “a holistic transformation plan dubbed ‘Project Optimus’” involving “a fulsome operational and commercial restructuring by management and a new team of frontline leaders.” Project Optimus is intended “to eliminate operational inefficiencies and bolster customer loyalty and retention by improving key customer metrics,” including lead times and “On-Time In-Full” delivery.

Prepetition Restructuring Discussions

Despite these efforts, “a longer-cycle customer onboarding timeline specific to the prime labels industry – often requiring between 12 and 24 months” contributed to the company’s ongoing market share losses, Gabel says. “Given expected revenue decline at the Company through FY2026, the mismatch of cash flows currently generated by the business to its funded debt obligations, and certain near-term maturities on such funded debt obligations,” the debtors approached funded debt holders regarding potential strategic and financial alternatives.

Around September 2025, the company commenced discussions with secured and unsecured creditors, as well as CD&R (as secured and unsecured creditor, equity sponsor and potential new-money plan sponsor), concerning one or more potential transactions. CD&R acquired the company as part of the Fort Dearborn merger in 2021.

Holders of funded debt formed three groups: a group of ABL lenders, a group consisting primarily of first lien holders (the “Secured Ad Hoc Group”) and a group consisting primarily of unsecured noteholders (the “Crossover Ad Hoc Group”). From November 2025 through January 2026, the company engaged in competitive negotiations with each of these groups to find a solution to an anticipated liquidity shortfall at the end of January 2026 and maximize value for all stakeholders.

At the same time, investment banker Evercore launched a marketing process for potential third-party new-money financing, contacting six institutions to solicit financing proposals. All six signed nondisclosure agreements, five submitted proposals, and two proposals were advanced. The debtors determined that the DIP offers from existing creditors were superior.

On Jan. 15, the company elected not to make an approximately $36.2 million interest payment on the 2027 unsecured notes, with a grace period set to expire Feb. 14. In the days preceding the petition date, the debtors resolved “material outstanding terms” between the secured ad hoc group and CD&R, and executed the RSA on Jan. 25.

According to Gabel, the proposed plan provides for a $3.9 billion deleveraging, “adequate capitalization for the go-forward business with over $550 million of liquidity at closing,” “cash savings of approximately $350 million in debt service obligations on an annual basis” and “a seven-year maturity runway on the New Debt.”

In contrast, the “near-final terms” of a proposal by the crossover group contemplated “approximately $450 million of net debt deleveraging and a two-year liquidity and maturity runway” through the end of 2028, Gabel says. “Despite the Crossover Ad Hoc Group’s willingness to accept the Debtors’ most recent proposal regarding the economics of the potential transaction, the potential for material and adverse tax consequences related to the transaction remained.”

“In light of progress made on the recapitalization on a substantially similar timeline, and the material benefits contemplated thereby and as set forth in the Plan,” the company determined that “the recapitalization presented the value-maximizing transaction, enabling the Company to right size its capital structure and provide a path to future profitability,” Gabel concludes.

The debtors’ largest unsecured creditors are as follows:

10 Largest Unsecured Creditors
Creditor Location Claim Type Amount
Wilmington Trust National
Association as Trustee
CorporateTrust Office		 New York 10.50% Senior Notes
due July 15 2027		 $  728,237,500
Wilmington Trust National
Association as Trustee
CorporateTrust Office		 New York 8.25% Senior Notes
due November 1 2029		 478,344,800
Avery Dennison Corp Oak Harbor, Ohio Trade 27,954,896
INX International Ink Co Chicago Trade 8,274,343
Sappi Chicago Trade 7,577,528
Mitsubishi Corporation Greer, S.C. Trade 6,625,010
Sun Chemical Corp Parsippany, N.J. Trade 6,382,469
Innovia Films Winston Salem, N.C. Trade 5,607,808
UPM-Kymmene Oyjz Palatine, Ill. Trade 5,253,041
Green Bay Packaging Green Bay, Wis. Trade 4,922,372

The case representatives are as follows:

Representatives
Role Name Firm Location
Debtors’ Co-Counsel Steven N. Serajeddini Kirkland & Ellis New York
Rachael M. BentleyPeter A. Candel

Ashley L. Surinak

 Chicago
Debtors’ Co-Counsel Michael D. SirotaWarren A. Usatine

Felice R. Yudkin

 Cole Schotz
P.C.		 Hackensack,
N.J.
Debtors’ Investment Banker NA Evercore NA
Debtors’ Financial Advisor NA AlixPartners NA
Counsel to the Special
Committee LABL Inc.		 NA Quinn Emanuel
Urquhart &
Sullivan LLP		 NA
Counsel to the Plan
Sponsor		 Scott B. SelingerBrett Novick Debevoise &
Plimpton		 New York
Counsel to the Plan
Sponsor		 Ray C. SchrockRyan Preston Dahl

Candace M. Arthur

 Latham &
Watkins		 New York
Financial Advisor to
the Plan Sponsor		 NA Moelis &
Company		 NA
Counsel to the
Secured Ad Hoc
Group		 Evan FleckMatt Brod Milbank New York
Financial Advisor to the
Secured Ad Hoc Group		 NA PJT Partners NA
Financial Advisor to the
Secured Ad Hoc Group		 NA Alvarez & Marsal NA
Counsel to Acquiom
Agency Services LLC
as DIP Term Loan
and Notes Agent		 Warren J. Martin Jr.Christopher P. Mazza Porzio,
Bromberg
& Newman		 Morristown, N.J.
U.S. Trustee Jeffrey M. Sponder Office of the
U.S. Trustee		 Newark, N.J.
Debtors’ Claims Agent Evan Gershbein Kurtzman Carson
Consultants		 El Segundo,
Calif.

Plan / Disclosure Statement

Classification and Treatment of Claims and Interests

The disclosure statement provides the following summary of the plan’s classification of claims and interests, impairment status and voting rights:

The plan provides the following treatment for each class of claims and interests:

  • DIP claims (unclassified): Each holder would receive its pro rata share of cash equal to its new-money DIP claims and new debt equal to its rollup DIP claims.
    • For administrative convenience, each holder of a new-money DIP claim that is a new preferred equity backstop party or is otherwise entitled to exercise new preferred equity subscription rights may elect to have cash it would be entitled to receive on account of its new-money DIP claim be used to satisfy all or a portion of its funding obligations with respect to the new preferred equity investment or related holdback on a dollar-for-dollar basis.
  • Class 1 – Other secured claims: Each holder would receive either payment in full in cash, the collateral securing its claim, reinstatement of its claim or such other treatment rendering its claim unimpaired.
    • Amount: $226 million
    • Projected recovery: 100%
  • Class 2 – Other priority claims: Each holder would receive payment in full in cash or other treatment consistent with section 1129(a)(9) of the Bankruptcy Code, which generally requires payment in full of administrative priority claims.
    • Amount: $100.5 million
    • Projected recovery: 100%
  • Class 3 – ABL facility claims: Each holder would receive, at its election, either payment in cash or a pro rata share of refinanced loans under the new ABL facility in an amount equal to the principal amount of its ABL claims, plus cash equal to any accrued but unpaid nondefault interest as of the effective date.
    • Amount: $444.8 million
    • Projected recovery: 100%
  • Class 4 – First lien secured claims: Each holder would receive its pro rata share of:
    • The “New Preferred Equity Subscription Rights” (rights to participate in the $489 million new preferred equity investment) and $1.57 billion in new term loans (provided each holder may elect to receive 80% of its claim in “New Term Loan Cash Out Proceeds” or new notes in lieu of new term loans);
    • The $200 million “First Lien Cash Consideration”;
    • New seven-year new warrants convertible into 9% of new common equity (subject to dilution by the MIP) with a strike price equal to $4.25 billion, less the difference between the plan total enterprise value on the effective date and the plan equity value;
    • The “First Lien New Preferred Equity Allocation” of 10.35% of new preferred equity ($62.1 million in aggregate face value of new preferred equity “with an aggregate common equity participating interest equal to 1.1% of the New Common Equity”), subject to dilution by the MIP and the new warrants; and
    • The “First Lien New Common Equity Allocation” of 13.3% of new common equity at plan equity value, subject to dilution by the MIP and the new warrants (provided each holder may elect to receive the value of its first lien new common equity allocation in the form of new term loans and not new common equity).
    • The plan defines first lien secured claims as “the Cash Flow Revolving Facility Claims, Cash Flow Term Loan Facility Claims, and Secured Notes Claims” (emphasis added).
    • Amount: $1.95 billion
    • Projected recovery: 81.6% to 98.4%
      • This estimate is for the $1.95 billion secured portion of the first lien claims (see Class 5 for the remaining deficiency claims).
      • As reported, sources have estimated the blended recovery rate for first liens at about 45%.
  • Class 5 – Junior funded debt claims: Each holder would receive its pro rata share of:
    • The $57.5 million “Junior Funded Debt Cash Consideration”; and
    • The “Junior Funded Debt New Common Equity Allocation” of 5% of new common equity (subject to dilution by the MIP and the new warrants), provided each holder may elect to receive the value of its junior funded debt new common equity allocation distribution in the form of new term loans and not new common equity.
    • The plan defines junior funded debt claims as “the First Lien Deficiency Claims and Unsecured Notes Claims” (emphasis added).
    • Amount: $3.2 billion
    • Projected recovery: 2.6% to 2.8%
  • Class 6 – General unsecured claims: Each general unsecured claim would be either reinstated or receive such other treatment rendering the claim unimpaired.
    • The plan defines general unsecured claims as any claims that are not “paid in full prior to the Effective Date,” administrative claims, professional fee claims, priority tax claims, secured tax claims, DIP claims, other secured claims, other priority claims, ABL facility claims, first lien secured claims, unsecured notes claims, first lien deficiency claims, intercompany claims or section 510(b) claims.
    • Amount: $236.3 million
    • Projected recovery: 100%
  • Class 7 Intercompany claims: Each intercompany claim would be (i) reinstated, adjusted, converted to equity, set off, settled, distributed or contributed; (ii) discharged, canceled and released without any distribution; or (iii) otherwise addressed at the debtors’ election.
    • Amount: NA
    • Projected recovery: NA
  • Class 8 Intercompany interests: Each intercompany interest would be (i) reinstated, adjusted, converted to equity, set off, settled, distributed or contributed; (ii) discharged, canceled and released without any distribution; or (iii) otherwise addressed at the debtors’ election.
    • Amount: NA
    • Projected recovery: NA
  • Class 9 – Section 510(b) claims: Section 510(b) claims would be discharged and holders would not receive any distribution.
    • Amount: NA
    • Projected recovery: 0%
  • Class 10 – Existing equity interests: Existing equity interests would be discharged and holders would not receive any distribution.
    • Amount: NA
    • Projected recovery: 0%

Other Plan Provisions

The plan includes releases in favor of the debtors, reorganized debtors, consenting stakeholders, ABL lenders, CD&R, DIP lenders, agents and trustees, backstop parties, new term lenders, new noteholders, new ABL lenders, creditors and equityholders that do not opt out of the nondebtor releases and their affiliates.

The plan includes exculpation protection for the debtors, reorganized debtors and their current control persons, directors, members of any committees of any entity’s board of directors or managers, equityholders, principals, members, employees, agents, advisory board members, financial advisors, attorneys, accountants, investment bankers, consultants, representatives and other professionals.

A term sheet detailing the post-emergence governance of the reorganized debtors is attached to the RSA. The term sheet provides that holders of a majority of all common units (excluding the the units held by CD&R and its affiliates) would have the right to appoint one manager and one observer to the post-emergence board so long as they own 10% or more of the common units each.

Financial Projections

The financial projections attached to the proposed DS include the following projected P&L statement through 2030:

The debtors provide the following projected balance sheet:

The debtors provide the following projected cash flow statement:

Valuation Analysis

Investment banker Evercore estimates the total enterprise value of the reorganized debtors at $2.9 billion to $3.4 billion on emergence, assuming an effective date of May 31. Assuming debt of $2.6 billion on emergence, the investment banker estimates the reorganized debtors’ equity value at $300 million to $800 million.

Liquidation Analysis

The debtors provide the following comparison of recoveries under the plan versus recoveries in a chapter 7 liquidation:

New Exit Facility

According to a term sheet attached to the RSA, the seven-year $1.94 billion new secured term facility would bear interest at 6% cash and 2.5% PIK during the first year after emergence and 7.5% cash and 1% PIK thereafter. These are “approximate all-in rates” based on SOFR/Euribor plus a margin. The facility has two years of call protection at 102%.

The new term facility would be backstopped by CD&R and members of the secured ad hoc group steering committee in exchange for an 8% backstop premium, payable in kind ($125.2 million in new term loans).

A grid detailing the covenants for the new facility is HERE. Anti-LME covenants include an “omniblocker” providing that “[n]one of Holdings, the Borrower or any Subsidiary shall enter into any Liability Management Transaction or make any Investment, sale, transfer or disposition of assets or Restricted Payment in connection therewith.” LME protections also include specific double-dip, J.Crew, Chewy and Incora blockers. The anti-LME covenants are described in more detail HERE.

A footnote to the term sheet provides that the terms described therein will also apply “to any exit notes, and the indenture for the exit notes shall be negotiated in good faith by the Lenders and the parties to the RSA to reflect the nature of bonds but otherwise match the terms set forth herein.”

New Preferred Equity

Under the plan, the debtors would issue $600 million in new preferred equity. A term sheet detailing the terms of the new preferred equity is HERE.

Each preferred share would entitle the holder to the rights and restrictions associated with “[[0.000017778]% of the New Common Equity, on a Fully Diluted Basis, but subject to dilution by the MIP Interests and the New Warrants]” – the “Common Unit Equivalent Participation.” Holders other than CD&R would benefit from the same rights with respect to the Common Unit Equivalent Participation as nonsponsor equityholders with respect to common units.

Holders would have liquidation and distribution rights senior to all other preferred equity and common equity of the issuer (other than with respect to the common unit equivalent participation issued on the closing date, which shall rank pari passu with common equity).

Dividends would be paid in cash when declared by the board in its sole discretion, but if not paid in cash would compound and accumulate quarterly. The dividend rate would be 12% per annum during the first seven years after issuance and increase by 1% on each anniversary thereafter.

Preferred shareholders would also be entitled to participate with holders of common units on any dividends declared on the common units through the common unit equivalent participation.

Call and redemption rights are detailed HERE.

DIP Financing Motion

The debtors propose a $657.5 million senior secured superpriority DIP facility, consisting of $250 million of new-money loans, with $150 million available upon interim DIP approval; a 1:1 “rollup” of $250 million of first lien claims; a $7.5 million DIP backstop premium; and up to an additional $150 million in incremental “new money” superpriority loans.

In addition, the debtors, DIP lenders and the prepetition ABL lenders agreed to the consensual use of cash collateral.

The DIP loans would be backstopped by plan sponsor CD&R and certain members of the secured ad hoc group, and 30% of the DIP commitments would be allocated to the DIP backstop parties on a pro rata basis. All first lien lenders can participate in the DIP facility and are entitled to fund 70% of the DIP commitments.

A portion of the DIP loans would be allocated to a tranche of loans denominated in euros or documented pursuant to a separate DIP note purchase agreement to accommodate any restrictions on a DIP lender from holding DIP loans denominated in U.S. dollars.

To secure the DIP financing, the debtors propose to grant a priming first priority lien on all first lien collateral and unencumbered assets, a junior lien on all ABL collateral and any assets subject to permitted prior liens and, subject to entry of a final order, a lien on all avoidance and recovery action proceeds.

The DIP financing bears interest at SOFR+6.75% for U.S. dollar-denominated DIP loans and Euribor+6.75% for euro-denominated DIP loans payable in cash, with an incremental 2% for the default rate, and matures on Nov. 30. The DIP proceeds may be used for working capital and general corporate purposes, bankruptcy-related costs and expenses and expenses related to the DIP facility.

The facility includes a backstop fee equal to 3% of the new-money loans, or $7.5 million, and a 2% original issue discount to be paid in cash, but solely with respect to the new-money DIP loans when they are funded and drawn. In addition, the debtors agree to pay the prepetition ABL lenders a consent fee payable in kind on the ABL commitments.

The debtors say that without the liquidity infusion and “corresponding signal to the marketplace” provided by the DIP facility, they will not have enough cash on hand to continue operating and risk material customer attrition and business disruption. In support of the proposed DIP financing, the debtors filed the declarations of Brent Banks of investment banker Evercore and Eric Koza of financial advisor AlixPartners.

Banks describes that the debtors received a DIP financing proposal from the crossover ad hoc group, which contemplated a $350 million to 500 million new-money financing facility, included a 1% OID and would be secured by a junior lien on ABL collateral and by a first lien on the debtors’ unencumbered property. According to Banks, the debtors ultimately decided the proposal was unactionable because it did not have the support of the secured ad hoc group and was not coupled with a viable chapter 11 plan.

The company proposes the following adequate protection to its prepetition lenders: replacement liens, allowed superpriority administrative expense claims, financial reporting requirements, payment of the professionals’ fees and expenses and postpetition interest payments.

In addition, the debtors propose a waiver of the estates’ right to seek to surcharge the DIP lenders’ collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b), subject to entry of the final DIP order.

The post-termination carve-out for professional fees is $8 million.

The proposed budget for the use of the DIP facility is HERE. As of the filing date, the debtors have approximately $67 million in cash on hand.

The DIP financing is subject to the RSA milestones set forth above.

The lien challenge deadline is 75 days after entry of the interim DIP order.

Other Motions

The debtors also filed various standard first day motions, including the following:

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