On May 11, 2016, the Delaware bankruptcy court issued an opinion in the RadioShack bankruptcy case addressing an intercreditor dispute between Salus Capital Partners, LLC, the “last out” lender in RadioShack’s prepetition $250 million term loan facility, and the lenders under RadioShack’s pre-petition $585 million ABL facility.i Salus argued that a pre-petition restructuring of the ABL facility violated the intercreditor agreement between the ABL lenders and the term loan lenders in a manner that reduced the amount the ABL lenders could receive from the proceeds of their collateral prior to the term loan lenders (which included Salus). The bankruptcy court disagreed and held that the pre-petition restructuring of the ABL facility was permissible under the intercreditor agreement and therefore the ABL lenders’ first lien rights in their collateral were not waived or otherwise impaired.
Background -
Fourteen months prior to the bankruptcy, in December 2013, RadioShack entered into separate financing arrangements with the original ABL lenders and the term loan lenders. The original ABL lenders provided RadioShack with a $585 million ABL facility, consisting of a $535 million revolving credit facility and a $50 million term loan. The term loan lenders, which included Salus, provided RadioShack with a $250 million term loan.
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