1. Turnaround Lending 2016: What Lenders and Borrowers Need to Know Panel #1 – Getting In
Robert P. Grbic, Panelist Patricia B. Jefferson, Panelist Capital Business Credit Miles & Stockbridge PC
Allen D. Wilen, Panelist Rosa J. Evergreen, Moderator
Eisner Amper Arnold & Porter LLP
Allen D. Wilen, Panelist
Eisner Amper
Patricia B. Jefferson, Panelist Robert P. Gbric, Panelist
Miles & Stockbridge PC Capital Business Credit

2. Capital Business Credit
Market Overview
Robert P. Grbic
Capital Business Credit

3. Total Chapter 11 Cases Filed 2000 - 2016

4. Chapter 11 Cases Filed – Over $1 Billion Assets
(Publicly Held Companies)
Source of Data: New Generation Research, Inc.

5. Large* Chapter 11 Cases Filed – Selected Industries
* Publicly held companies with over $100 million in pre-petition assets.
Source of Data: New Generation Research, Inc.

6. 46 North American Oil & Gas Exploration & Production Companies 5 17 17
Bankruptcy Cases Filed January 2015 – August 2016
TEXAS
DELAWARE
CANADA
COLORADO 5 46 17 17
ALL OTHER STATES
LOUISIANA
NEW YORK 9 4 4
Source: Haynes and Boone, LLP
Oil Patch Bankruptcy Monitor

7. Filing Location of Large* Chapter 11 Cases
January 2000 – August 2016
DELAWARE
SOUTHERN DISTRICT
OF NEW YORK
* Large Case = Over $100 Million in Pre-petition Assets
196
427
TEXAS
CALIFORNIA
ILLINOIS
EVERYWHERE ELSE
269 33 49 80
Source of Data: New Generation Research, Inc.

8. Role of the CRO & Related Considerations
Allen Wilen, CPA/ CFF,CTP, CFA, CIRA

9. The Parties: Understanding the Roles
Some of the Players
Secured Creditor
Junior Secured Creditor
Noteholders
Trade
Unions
Government Entities
Regulatory
Taxing
Pension Funds
Equity
Board of Directors/Trustees
Officers of the Debtor
External Family Members

10. The Role of the CRO – Non-Financial Dynamics
A keen knowledge of the interactions and potential conflicts of interest amongst the parties is crucial to the success of any turnaround…
Personal – understand the interactions of the parties
Principals of the business
Counsel
Financial Advisors
Individual creditor motivation and fears
Individual representatives at each of the creditors’ motivation and fears
Third party actions and reactions by parties without an actual financial stake in the deal
Government
Community
National Union representatives
Side deals that don’t include the Debtor by different classes of creditors
Providing credibility to the process vs. appearing to be in secured creditors’ pocket

11. The Role of the CRO – The Strategy Process
Now that we know who the players are…how do we develop a strategy?
What does the lender want the business to do?
Liquidate
Sell
Reorganize
Restructure debt
What is the best method of achieving success in getting to that objective?
Article 9
Bankruptcy – 7 or 11
ABC
Receivership
Composition Agreement
Does the Debtor agree with the lender?
If not, potential alternatives?
Does the company have the ability to survive without its senior secured lender on board?
If yes, develop a budget that both sides can agree to in order to get the ultimate objective

12. DIP Deal Term Considerations
Patricia B. Jefferson
Miles & Stockbridge PC

13. Local Bankruptcy Rules
Rule : Requirements for Cash Collateral and Financing Motions and Orders
Cash collateral motions shall disclose:
The existence of an insider relationship between the debtor and creditor
The nature or source of the cash collateral
Cash flow projection including projected revenue and a line-item proposed budget for use of funds
Estimated amount debtor owes to creditors claiming an interest in the cash collateral as of the petition date
Description of the collateral pledged to secure the claims of creditors claiming an interest in the cash collateral

14. Local Bankruptcy Rules
Rule : Requirements for Cash Collateral and Financing Motions and Orders
Special provisions to be highlighted, and the justification for such provisions:
Cross-collateralization protection other than replacement liens and other adequate protection
Provisions and findings of fact that bind the estate or other parties regarding the validity, perfection or amount of the secured creditor’s prepetition lien, or the waiver of claims without giving parties at least 75 days from the petition date, and the creditors committee, if formed, at least 60 days from formation to investigate
Provisions that seek to waive rights under Section 506(c)
Provisions that grant liens on chapter 5 causes of action

15. Local Bankruptcy Rules
Special provisions to be highlighted, and the justification for such provisions (continued):
“Roll Up” provisions
Provisions that treat committee professionals differently from professionals retained by the debtor with respect to a carve-out, and provisions that limit committee counsel’s use of the carve-out
Provisions that prime secured liens without consent
Provisions that grant a secured creditor any relief from the automatic stay without further order of the Court

16. Local Bankruptcy Rules
Rule : Requirements for Cash Collateral and Financing Motions and Orders
Cash collateral and financing motions shall include a summary of the essential terms of the proposed use of cash collateral and/or financing
A proposed order approving cross-collateralization or a roll-up must include language reserving the Court’s right to unwind the protection in certain circumstances
Interim orders shall only provide what is necessary to avoid immediate and irreparable harm to the estate. Absent extraordinary circumstances, proposed interim orders shall not include any of the provisions identified in the local rules as “Special Provisions.”

17. Trends in DIP Loans
In In re Emerald Oil, Inc., the Bankruptcy Court for the District of Delaware indicated it would reject the proposed DIP Financing unless certain provisions with which the Court took issue were modified, including:
The breadth of liability releases
The amount of liens attached to avoidance actions
The amount of funds and time afforded to the unsecured creditors committee to investigate additional recoveries
The proposed $110 million rollup to cover prepetition debt
Ultimately the DIP was approved after the releases were restricted, the committee was granted $600,000 to fund its investigation, and the rollup was eliminated. In re Emerald Oil, Inc., Bankr. D. Del. Case No

18. Lenders Beware: Some Considerations
Consent to file bankruptcy provisions may be invalidated
In re Intervention Energy Holdings, LLC, et al., 553 B.R. 258 (Bankr. D. Del. 2016)
In re Lake Michigan Beach Pottawattamie Resort, LLC, 547 B.R (Bankr. N.D. Ill. 2016)
Beware of lender liability risks
In re SGK Ventures, LLC, 521 B.R. 842 (Bankr. N.D. Ill. Nov. 30, 2014)
Pay attention to terms of cash collateral order
In re Global Protection USA, Inc., 546 B.R. 586 (Bankr. D. N.J. 2016)

19. Concluding Comments
What issues should lenders/ parties be thinking about when considering a restructuring?
Lessons learned? Takeaways?
Questions?