Violin Memory seeks approval of sponsorship agreement, DIP facility

By Caroline Salls

Pittsburgh, Feb. 6 – Violin Memory, Inc. requested court approval of an agreement under which Quantum Partners LP affiliate VM Bidco LLC will sponsor the company’s Chapter 11 plan, according to a motion filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

Investment fund Quantum Partners holds $25.65 million of Violin’s outstanding convertible notes and is managed by Soros Fund Management LLC.

Under the proposed agreement, the sponsor would provide an $8 million debtor-in-possession facility to finance Violin Memory’s continued operations and restructuring efforts. The DIP facility will be converted into an exit facility under a confirmed plan of reorganization.

The DIP facility will mature on the earliest of Aug. 30, 2017, the plan effective date, the occurrence of an event of default, the completion of any alternate transaction, entry of a court order granting foreclosure of any assets with a value in excess of $100,000 or a motion for appointment of a Chapter 11 trustee or examiner or for dismissal or conversion of the bankruptcy cases and Violin Memory’s filing of support for an alternate transaction that does not repay the DIP facility in full.

Interest will accrue at a rate of Libor plus 900 basis points, subject to a 1% Libor floor.

In addition, VM Bidco will provide $15 million in cash for recoveries to Violin Memory’s creditors under a plan in which Quantum Partners will receive all equity interests in the reorganized company in lieu of cash for its claims.

The plan sponsor will also assume some employee claims and counterparty obligations.

Specified avoidance actions will be preserved for the benefit of unsecured creditors.

The parties agreed to work toward obtaining confirmation of the plan by April 20.

Santa Clara, Calif.-based Violin Memory develops and supplies computer data storage products. The company filed bankruptcy on Dec. 14 under Chapter 11 case number 16-12782.

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