Term Loan Claims - On the DHCP Effective Date, the holders of Term Loan Claims will receive their pro rata share of new term loans under an amended and restated credit facility agreement in the aggregate principal amount of $400 million, and 100% of the New Common Stock, which will be privately held;
Second Lien Notes Claims - On the DHCP Effective Date, the holders of the Second Lien Notes will not receive any distribution;
Go-Forward Trade Claims - On the DHCP Effective Date, trade creditors identified by the Company (with the consent of the Requisite Term Lenders) as being integral to and necessary for the ongoing operations of New Ditech) will receive a distribution in cash in an amount equaling a certain percentage of their claim, subject to an aggregate cap; and
Existing Equity Interests - On the DHCP Effective Date, holders of the Company’s existing preferred stock, common stock and warrants will have their claims extinguished.
If the Debtors proceed to confirmation of a sale transaction, the Debtors will distribute proceeds of such transaction in accordance with the priority scheme under the Bankruptcy Code.
Under the DHCP RSA, on the Election Date, the Electing Term Lenders may deliver an election notice to the Company stating that the Electing Term Lenders wish to consummate an elected transaction as follows: (i) the DHCP Reorganization Transaction, or (ii) master servicing transaction (as part of the DHCP Reorganization Transaction), or (iii) sale transaction, and, if applicable, (iv) in connection and together with an election of (i), (ii), or (iii), any asset sale transaction(s), provided that inclusion of any asset sale transaction(s) is not incompatible with successful consummation of the elected transaction in (i), (ii) or (iii). If the Debtors do not proceed with the elected transaction, the Consenting Term Lenders can terminate the DHCP RSA.
On February 11, 2019, as contemplated by the DHCP RSA, the Debtors filed the DHCP Bankruptcy Petitions and the DHCP Chapter 11 Cases commenced thereby under the Bankruptcy Code in the Bankruptcy Court. Consistent with the DHCP RSA, on March 5, 2019, the Debtors filed the DHCP Plan with the Bankruptcy Court seeking to emerge from Chapter 11 on an expedited timeframe. The Debtors filed an amended DHCP Plan with the Bankruptcy Court on March 28, 2019. The Debtors are continuing to operate their businesses as debtors in possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The Company intends to continue to operate its businesses during the pendency of the DHCP Chapter 11 Cases. To assure ordinary course operations, the Debtors have obtained approval from the Bankruptcy Court for a variety of first day motions seeking various relief, authorizing them to maintain their operations in the ordinary course.
The filing of the DHCP Bankruptcy Petitions described above triggers an event of default or an early amortization event under certain of the Company's debt instruments. The filing of the DHCP Bankruptcy Petitions also triggers the liquidation preference of the Company’s Mandatorily Convertible Preferred Stock. Certain of the Company's obligations, including the payment of interest under the Company's debt instruments, are stayed under the Bankruptcy Code during the pendency of the DHCP Chapter 11 Cases.
During the pendency of the DHCP Chapter 11 Cases, the Bankruptcy Court granted relief enabling the Company to conduct its business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing the payment of employee wages and benefits, the payment of taxes and certain governmental fees and charges, continued operation of the cash management system in the ordinary course, and payment of the prepetition claims to certain of the Company's vendors. For goods and services provided following the DHCP Petition Date, the Company continues to pay vendors under normal terms.
DHCP DIP Warehouse Facilities
On February 8, 2019, the Parent Company, as guarantor, along with its wholly-owned subsidiaries Ditech Financial and RMS, entered into the DHCP Commitment Letter with Barclays Bank PLC and Nomura Corporate Funding Americas, LLC regarding the terms of the DHCP DIP Warehouse Facilities, which, upon approval from the Bankruptcy Court on February 14, 2019, provide the Company up to $1.9 billion in available financing. Proceeds of the DHCP DIP Warehouse Facilities were used to repay and refinance RMS’ and Ditech Financial’s existing master repurchase agreements and variable funding notes issued under existing servicer advance facilities. The existing master repurchase agreements and variable funding notes issued under servicer advance facilities were terminated or otherwise replaced under the DHCP DIP Warehouse Facilities. The DHCP DIP Warehouse Facilities will be used to fund Ditech Financial’s and RMS’ continued business operations, providing the necessary liquidity to the Debtors to implement the DHCP Restructuring.