Sirva files pre-packaged Chapter 11 bankruptcy, obtains commitment for $150 million DIP facility

By Caroline Salls

Pittsburgh, Feb. 5 - Sirva, Inc. made a pre-packaged Chapter 11 bankruptcy filing Tuesday in the U.S. Bankruptcy Court for the Southern District of New York under an agreement with its lenders to restructure its senior secured debt, according to a company news release.

The bankruptcy filing only includes the company's U.S. operations, the release said.

Sirva said it negotiated the pre-packaged bankruptcy to free its operations from a heavy debt service burden and to strengthen its balance sheet so that it is better positioned to weather the continuing weak U.S. housing market.

Under the company's pre-packaged plan of reorganization, which received overwhelming support from the company's lenders, Sirva's outstanding bank debt will be reduced by $200 million and annual cash interest expense will be reduced by $54 million.

Sirva's outstanding capital stock will be cancelled upon completion of the restructuring.

Treatment of creditors under the plan will include:

• Holders of pre-bankruptcy facility claims will receive a share of obligations under the company's second-lien facility and a share of 75% of the common stock in the reorganized company;

• Holders of other secured claims will either be paid in full in cash, or the company will return the collateral securing the claim;

• Holders of other priority claims will be paid in full in cash;

• Holders of unsecured ongoing operations claims will be paid in full in cash from the proceeds of the collateral of the pre-bankruptcy lenders;

• Holders of general unsecured claims and equity interests will receive no distribution under the plan; and

• Intercompany claims and intercompany interests will be reinstated.

"Sirva undertook a comprehensive strategic review to evaluate all the options for restructuring our balance sheet and, after careful consideration, determined that a pre-packaged Chapter 11 filing provided the most efficient way forward for the company," chief executive officer Robert W. Tieken said in the release.

The company has requested court approval of several "first-day motions" that will allow it to continue to operate on a normal basis during the in-court restructuring, which it said it expects to complete in 60 to 90 days.

The first-day motions will ensure that employee pay and benefits are fully protected, that all current and future obligations to Sirva's customers and agents are fulfilled and that suppliers will be paid in full.

DIP terms

In connection with the bankruptcy filing, Sirva has obtained a commitment for $150 million in debtor-in-possession financing, which will be converted into a $215 million senior secured exit facility. A total of $130 million of the exit facility will be available for letters of credit.

JPMorgan Chase Bank, NA is the administrative agent on the DIP facility, and J.P. Morgan Securities, Inc. is the lead arranger and bookrunner.

Proceeds will be used to repay the company's pre-bankruptcy senior secured loans and to fund working capital and general corporate needs.

The DIP facility will include an $85 million revolving credit facility, with up to $60 million available for letters of credit, and a $65 million term loan.

The DIP facility will mature on the earlier of June 30 and 30 days after entry of the interim DIP order if a final order has not been entered.

Interest will be either Base rate plus 550 basis points or Libor plus 650 bps, at Sirva's option.

Upon conversion of the DIP facility to an exit facility, Sirva will pay a conversion fee of 25% of the common stock of the reorganized company.

In addition, Sirva will pay an upfront fee equal to 2% of the total DIP commitment, plus 1% of $42.31 million backstopped under an incremental commitment letter. Sirva will also pay a $250,000 per year agency fee.

"The ability to come to a consensual debt-for-equity agreement with our lenders demonstrates our lenders' belief in Sirva's business model and their long-term faith in the company," Tieken said in the release.

"When our financial restructuring efforts are complete, we will be in a better position to serve our customers and capitalize on new opportunities within the global relocation landscape."

Debt details

The company listed zero to $50,000 in assets and $500 million to $1 billion in debt on its bankruptcy filing. According to a 10-Q filed with the Securities and Exchange Commission, Sirva had $790.6 million in assets and $753.7 million in debt as of Sept. 30.

Sirva's largest unsecured creditors include:

• Sirva U.K. Pension Scheme, Middlesex, England, with a $31.81 million U.K. pension guarantee claim;

• Owner Operators Independent Drivers Association, Washington, D.C., with a $5 million litigation settlement claim;

• TEAM Relocations, London, with a $3.81 million vendor claim;

• Johnson & Johnson, Brunswick, N.J., with a $3.4 million client claim;

• Abbot Laboratories, North Chicago, Ill., with a $2.79 million client claim;

• UnitedHealth Group, Minnetonka, Minn., with a $2.53 million client claim;

• U.S. Department of Treasury, Washington, D.C., with a $1.19 million client claim;

• Beltmann Group Inc., Roseville, Minn., with a $1.19 million agent claim;

• 3M Co., St. Paul, Minn., with a $1.07 million client claim; and

• Cargill, Inc., Minneapolis, with a $1.02 million client claim.

Sirva is a Westmont, Ill.-based relocation services provider. Its Chapter 11 case number is 08-10375.

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