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Madison Square Boys & Girls Club creditor group objects to DIP loan
Chicago, Nov. 7 – Madison Square Boys & Girls Club, Inc.’s post-petition financing has had an objection lodged against it from the committee of unsecured creditors before entry of a final order, according to an objection filed with the U.S. Bankruptcy Court for the Southern District of New York.
The heart of the objection is that it is premature for the debtor to ask for the debtor-in-possession facility.
The program has been paying its bankruptcy case expenses until now through donations, which are not to be used to settle survivors’ claims from sexual abuse.
The loan would encumber or restrict assets that could be used for survivors’ claims.
There is no viable path to restructuring.
In essence, then, the creditors committee asserts, the DIP facility sought is actually exit financing in disguise.
The committee says that the debtor has adequate liquidity to continue its ordinary course operations and will be cash flow positive at least through the end of the year on an operating basis.
As previously reported, the company has lined up an $11 million DIP term loan with Carver Federal Savings Bank. The facility bears interest at 6.75% for the first two years, to be followed upon a conversion into an exit facility by rate resets on the second- and seventh-year anniversaries of the initial closing.
The debtor also proposes to pay a $50,000 breakup fee to SummitBridge National Investments VIII LLC, which was set to be the lender under the $11 million DIP facility the company had originally sought court approval of.
The New York-based non-profit after-school program provider filed Chapter 11 bankruptcy on June 29 under case number 22-10910.
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