Synagro approved for interim access to $15 million of DIP facility

By Jim Witters

Wilmington, Del., April 25 - Synagro Technologies, Inc. received approval for interim access to $15 million of its $30 debtor-in-possession financing facility during an April 25 hearing in the U.S. Bankruptcy Court for the District of Delaware.

The bankruptcy case was filed to allow Synagro to de-leverage its balance sheet and sell substantially all of its assets to EQT Infrastructure II in a transaction valued at $455 million.

As previously reported, the DIP financing, along with the company's cash flow from operations, is projected to provide ample liquidity to operate the business and meet ongoing obligations to customers, vendors and employees through the completion of the sale process.

Synagro's existing first-lien lenders have committed to provide $30 million of additional capital in the form of the DIP financing.

Bank of America, NA is the DIP loan agent.

The financing will mature in the earliest of 270 days from closing, 35 days after entry of the interim order if a final order has not been entered and 15 days after the closing of a sale of substantially all company assets.

Interest will be either Base rate plus 550 basis points or Libor plus 650 bps.

Debtors attorney George N. Panagakis told the court that one other potential DIP lender emerged, but that lender's proposal would have entailed a priming battle with the first-lien lenders.

The costs and time spent in that battle would have far outweighed any benefits gained through more preferable financing terms, he said.

A hearing for final DIP approval is scheduled for 9:30 a.m. ET on May 24.

Another path

An attorney for American Securities Opportunities Fund said his client is a participant in the DIP facility and may elect to engage in bidding for Synagro's assets or proposed a different Chapter 11 plan.

"This case is now a sale case, but it could take a very different path," he said.

Panagakis said the debtors are open to any and all offers and inquiries.

Bidding procedures

Also during the hearing, the judge Brendan L. Shannon schedule a bid procedures hearing for May 13.

As previously reported, if the court does not enter a bid procedures order within 21 days or the sale order within 76 days of the filing date, Synagro must reimburse up to $4.5 million of EQT's expenses.

If the company completes an alternate transaction within one year of the stalking horse agreement termination date, EQT will receive a breakup fee of $13.8 million, minus any previously paid expense reimbursement amount.

However, if the agreement is terminated because of a breach by the sellers or to complete an alternate transaction, EQT will receive the full amount of the breakup fee.

Under the proposed bidding procedures, competing bids would be due by 5 p.m. ET on June 3 and must be for at least $20 million more than the stalking horse bid.

If competing bids are received, an auction would be held on June 10.

The company said it expects the sale to be completed in about 60 to 90 days.

Shannon tentatively scheduled a sale hearing for 9:30 a.m. ET on June 27.

The sale hearing date is earlier than the July 8 date requested by the debtors. Shannon said he is unavailable during early July.

However, he said, if the official committee of unsecured creditors or another party objects to the earlier date, the court will consider a sale hearing later in July.

Panagakis said he plans to negotiate with the creditors to move the sale hearing to an earlier date and hopes to bring a proposal before the court during the May 13 hearing.

Synagro Technologies, a Houston-based recycler of biosolids and other organic residuals, filed for bankruptcy on April 24. The Chapter 11 case number is 13-11041.

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