Magazine article The RMA Journal

Bank Earned Commitment Fee by Providing DIP Financing, Even Though the Credit Facility Wasn't Used

Magazine article The RMA Journal

Bank Earned Commitment Fee by Providing DIP Financing, Even Though the Credit Facility Wasn't Used

Article excerpt

IN RE FLEETWOOD Enterprises, Inc., (1) the issue was whether Bank of America could retain a commitment fee on behalf of a syndicate of lenders who provided a debtor-in-possession credit facility that was never used. The court held that it could.

Fleetwood Enterprises Inc. and its affiliates filed a Chapter 11 petition on March 10, 2009. It acted as debtor-in-possession. An official Unsecured Creditors Committee was appointed on March 19, 2009.

Before entering bankruptcy, Fleetwood had a secured credit facility with a syndicate of lenders with Bank of America as agent. The outstanding amount was about $60 million at the date of the petition.

On March 29, 2009, Fleetwood filed a motion for leave to enter into a secured debtor-in-possession (DIP) financing arrangement not to exceed $80 million under Section 364(c) of the Bankruptcy Code. This required proof that credit could not be obtained elsewhere. It contemplated a superpriority lien for the lenders and, in addition, obligated Fleetwood to pay a $2.4 million commitment fee. The fee was to become the focus of the litigation.

In a series of hearings, the Unsecured Creditors Committee strenuously objected to the commitment fee and the lender stated receipt of the commitment fee was a precondition to proceeding further. The court entered an interim order saying, "They get their commitment fee...."

Prior to a final hearing on the motion for DIP financing, the committee reiterated its objection to the commitment fee, calling it "unconscionable." Later, in April 2009, Fleetwood withdrew its motion for DIP financing and replaced it with a motion to use cash collateral. Apparently, Fleetwood was able to fund its ongoing operations with cash collateral.

In August 2009, Fleetwood and the committee executed a stipulation that allowed the committee to seek recovery of the $2.4 million commitment fee. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.