MRU amends 12% notes' payables covenant; further deadline extension possible with sale or debt raising

By Caroline Salls

Pittsburgh, Nov. 21 - MRU Holdings, Inc. entered into a third amendment on its 12% senior secured notes that changes a covenant related to the amount of debt in relation to payables, according to an 8-K filed Friday with the Securities and Exchange Commission.

Under the amended covenant, payables cannot exceed $12 million on or before Jan. 8 and $5 million after Jan. 8.

As previously reported, the second amendment reached on Nov. 3 required payables not to exceed $11 million on or before Nov. 3 and not to exceed $5 million after Nov. 3.

The deadline was extended seven times while the company and noteholders negotiated the third amendment.

Also under the third amendment, the Jan. 8 payables limit decrease date will be extended to Jan. 31 if specified conditions are met by Jan. 8.

Specifically, the conditions to the extension include MRU entering into definitive documentation to sell assets or raise debt or equity funds in an amount of at least the greater of $50 million and the amount reasonably necessary for the company to operate its business on a positive net income basis and to satisfy its debt and financial obligations.

The conditions also require the company to place $11.2 million in a segregated bank account for the benefit of the noteholders as security until the notes are repaid in full.

In addition, MRU and its subsidiaries must be free of defaults on the senior secured notes beginning on Nov. 20.

According to the 8-K, MRU and its subsidiaries have agreed to maintain at least $4.35 million of unrestricted and unencumbered cash on hand, and the company's Embark subsidiary has agreed to maintain at least $1.5 million of unrestricted and unencumbered cash on hand.

In connection with the third amendment, some of MRU's subsidiaries granted security interests for the benefit of the noteholders to support guaranties provided by the subsidiaries at the time the notes were first issued.

On Nov. 20, subsidiary Goto College entered into a pledge agreement under which it agreed to pledge to collateral agent Viking Asset Management LLC all of the capital stock and other equity interests and security of Embark and Embark Online owed by Goto College for the benefit of the noteholders.

Additionally, each subsidiary agreed to pledge and grant a security interest in substantially all of their assets except Embark and Embark Online bank deposit accounts to Viking for the benefit of the noteholders.

Embark and Viking also entered into a trademark security agreement and a copyright security agreement to provide Viking with security interests in those copyrights and trademarks for the benefit of the noteholders.

MRU is a New York-based provider of student loans.

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