Velti, GSO, creditors reach global settlement; final DIP loan approved

By Jim Witters

Wilmington, Del., Dec. 2 - Velti Inc. received final approval of $26.25 million in debtor-in-possession financing after debtors attorney Richard A. Chesley told the court a global settlement resolved all objections during a Dec. 2 hearing in the U.S. Bankruptcy Court for the District of Delaware.

The agreement, negotiated over the weekend, came together just an hour before the hearing, Chesley said.

The official committee of unsecured creditors had objected to several second-day motions, including the motion for final DIP approval.

Committee attorney Douglas M. Foley had previously reserved the committee's right to fully investigate the proposed financing and asset purchase agreement, as well as the lender and stalking-horse bidders, who are affiliates of GSO Capital Partners LP.

Some GSO entities purchased 100% of the pre-bankruptcy debt secured by assets of the Velti debtors and various non-debtor obligors at a deep discount just days before the company filed bankruptcy.

The Velti debtors also plan to sell substantially all of their assets to another GSO affiliate, with the proposed sale consideration to be funded by the stalking-horse bidder's credit bid of the rolled-up debt under the pre-bankruptcy credit facility and the debtor-in-possession financing.

The proposed transaction includes the sale of business lines operated by Velti Inc. and Air2Web in the United States, Air2Web India, and Velti DR Ltd. and Mobile Interactive Group, Ltd. in the United Kingdom.

Chesley told judge Peter J. Walsh that the global agreement will allow the case to proceed on its expedited timeline that concludes with a Dec. 20 sale hearing.

Settlement terms

The proposed settlement, as described by Chesley, Foley and GSO attorney Sandeep Qusba, includes the following:

• A $500,000 payment to the creditors committee.

Of that amount, $250,000 will go to the general unsecured creditors trust for recovery to creditors and $250,000 will provide seed money for a litigation trust;

• A provision for negotiation between the creditors and GSO to determine which causes of action will go to GSO as part of the asset purchase agreement and which will go to the litigation trust;

• A withdrawal of all objections filed by the creditors committee;

• A negotiated wind-down budget;

• A $50,000 payment from the sale proceeds to the general unsecured creditors trust;

• GSO's agreement to subordinate its unsecured claims so as not to dilute recoveries to other general unsecured creditors; and

• A waiver by the committee to its challenge period for investigating the GSO liens.

The $500,000 will come from the debtors' investment banker, Jefferies LLC.

Jefferies received a $500,000 payment that the committee challenged as preferential treatment under the bankruptcy code. As part of the settlement, Jefferies agreed to refund the money rather than litigate.

Chesley said the debtors intend to file a formal motion for approval of the settlement as soon as negotiations between the committee and GSO conclude.

Settlement caveat

Qusba warned that should negotiations falter on the causes of action or the wind-down budget, GSO could walk away from the settlement and the proposed purchase.

"We are not going to fund this case come hell or high water," he told the court.

However, GSO believes the proposed agreement can bring "peace in the valley," greatly reducing the cost of the case and allowing the debtors to adhere to the court-approved timeline for the sale, Qusba said.

Foley said the committee plans to focus on the GSO negotiations for the coming 10 days.

"We don't expect any competing bids due to the lack of time and information available to prospective bidders," Foley said.

DIP terms

As previously reported, the DIP financing includes a $10 million cash injection to support the operations included in a proposed sale, $15 million total principal amount of loans outstanding under the company's pre-bankruptcy credit agreement and $1.25 million of fees to be paid in kind and added to the outstanding principal amount of the DIP loans.

U.S. Bank, NA is the administrative agent.

The facility will mature on the earliest of Dec. 31, subject to the borrower's election to extend that date to Jan. 30, the effective date of a Chapter 11 plan, the closing of the sale and the acceleration of the DIP loans.

Interest is 12%.

Based in London, Velti plc provides mobile software platforms, applications and services for operators and advertising agencies in southeastern Europe, the United Kingdom and the United States. The U.S. operations filed for bankruptcy on Nov. 4 under Chapter 11 case number 13-12878.

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