Hollander Sleep Products LLC et al (“Hollander”) operated in the bedding products market, manufacturing pillows, comforters, mattress pads and other bedding products from 11 production facilities across the US and two in Canada. Hollander generated annual revenue in excess of US$500 million and employed over 2,000 employees.
KSV is the Court appointed Information Officer under Part IV of the Companies’ Creditors Arrangement Act in Hollander’s cross-border proceedings, with the main proceedings filed under Chapter 11 in the US. In preparing for Hollander’s Part IV application, cross-border DIP loan issues were a major consideration. Hollander had the following facts:
- large US operations, with less significant Canadian operations;
- Canadian borrower not liable for prepetition obligations owing to Hollander US’s ABL lenders;
- $90 million DIP loan approved (with a “roll-up” structure) in the Chapter 11 proceeding conditional on being recognized in the Canadian proceeding; and
- Canadian borrower to be jointly and severally liable under the proposed DIP facility.
After negotiation, the Canadian Court approved the DIP facility and recognized the efforts made by the Canadian professionals to include provisions in the DIP facility that deal with, up-front, the concerns expressed by the Court in previous cross-border proceedings. These issues included an assessment of the solvency of the Canadian debtor on a standalone basis and a marshalling concept to ensure that Canadian assets were used first to satisfy Canadian DIP ABL indebtedness, and not be applied to satisfy US DIP ABL indebtedness until all US assets were first exhausted.
Over the course of the proceedings, as Information Officer, we assisted the US investment banker retained to market Hollander’s business and assets for sale pursuant to a sale process that was approved by the US and Canadian Courts. The sale process resulted in a going-concern transaction with an arm’s length purchaser. The US and Canadian businesses continue to operate.