Deloitte 15 - 5

1086 Words5 Pages
Case 15-5 Trouble at the Resort Resort Co. (the “Company”) is a private company that operates luxury hotel properties. As of December 31, 2010, Resort Co. had $432 million in uncollateralized term loans (the “Original Debt”) outstanding with two lenders, Bank A ($129.6 million) and Bank B ($302.4 million). Note that these are not participating loans. Further, issuance costs associated with the Original Debt in the amount of $3 million remained unamortized as of December 31, 2010 ($900,000 and $2.1 million for the loans held by Bank A and Bank B, respectively). As a result of lower than expected travel during the holiday season, the Company projected a short-term cash flow shortage and would not be able to meet the short-term…show more content…
Contemporaneously with the modification of the Original Debt terms (explained above), Bank B extended the Company a new $15 million term loan (the “New Term Loan”), which is due December 31, 2020 (the same due date as the Modified Debt). The New Term Loan has the same interest rate and same payment schedule as the Modified Debt (see above). The New Term Loan was extended to the Company and the proceeds were to be used (1) to pay fees to Bank A and expenses incurred with third parties (accounting legal advisors) in connection with the Restructuring, (2) to pay for a partial principal paydown of the Original Debt held by Bank A ($5 million), and (3) after payment of the amounts in (1) and (2) for working capital and other general corporate purposes permitted pursuant to the Modified Debt. Copyright 2014 Deloitte Development LLC All Rights Reserved. Case 15-5: Trouble at the Resort Page 2 The Company made a cash payment of $1 million to Bank A, and in exchange, Bank A waived the default provisions associated with the cross default of the Original Debt. The Company issued equity instruments to Bank B with a fair value of $30 million. In exchange for the equity, Bank B agreed to (1) waive any default penalties associated with the cross default of the Original Debt, (2) enter into the Modified Debt agreement, and (3) extend the New Term Loan. The issuance of equity did not

More about Deloitte 15 - 5

Open Document