EB Holdings II, Inc. Informational Report

DALLAS--()--EB Holdings II, Inc., a Nevada corporation (“EBH II”), reports the following information in connection with its EUR 600m PIK Loan Agreement dated March 23, 2007 (the “Loan”):

1. On July 27, 2017, EBH II, through its advisors, furnished to Kirkland & Ellis LLP (“Kirkland”), legal advisors to an ad hoc committee of certain purported holders of the Loan consisting of funds affiliated with each of Alcentra Limited, Fortress Investment Group/Mount Kellet Capital Management, GoldenTree Asset Management LP, HIG Capital International Advisors LLP/Bayside Capital, Sound Point Capital Management, LP and Varde Partners Europe Limited (the “Committee”), the document below relating to a proposed restructuring of the loan (which is in response to the Committee’s proposal submitted through Kirkland on June 28, 2017):

For Settlement Purposes Only
July 27, 2017

EB HOLDINGS II, INC.

Summary of Key Restructuring Terms

THIS TERM SHEET (“TERM SHEET”) CONTAINS THE PRINCIPAL TERMS AND CONDITIONS OF A POTENTIAL RESTRUCTURING TRANSACTION (THE “RESTRUCTURING”) AMONG (A) EB HOLDINGS II, INC., A NEVADA CORPORATION (THE “COMPANY”), (B) HOWARD M. MEYERS (“MEYERS” OR “SPONSOR”) AND (C) EACH OF THE BENEFICIAL OWNERS (OR INVESTMENT MANAGERS OR ADVISORS FOR THE BENEFICIAL OWNERS) OF THE COMPANY’S PIK LOAN FACILITY (THE “PIK LOAN”) IN THE ORIGINAL PRINCIPAL AMOUNT OF 600,000,000 EUROS WHO BECOME A PARTY TO A RESTRUCTURING SUPPORT AGREEMENT (THE “RSA”), AS DESCRIBED BELOW (COLLECTIVELY, THE “CONSENTING PIK HOLDERS”).

THIS TERM SHEET HAS BEEN PRODUCED FOR DISCUSSION AND SETTLEMENT PURPOSES ONLY. THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH RESPECT TO ANY LOAN INSTRUMENTS OR SECURITIES OF THE COMPANY. ANY SUCH OFFER OR SOLICITATION SHALL COMPLY WITH ALL APPLICABLE LAWS.

Parties:  

The parties to this Term Sheet (the “Parties”) are (i) the Company, (ii) Meyers, and (iii) certain holders of the PIK Loan who are managed accounts and/or affiliates of GoldenTree Asset Management LP, Alcentra Limited, Fortress Investment Group/Mount Kellet Capital Management, HIG Capital International Advisors LLP/Bayside Capital, Sound Point Capital Management, LP, and Värde Partners Europe Limited (such holders, collectively, the “PIK Holder Committee”). The PIK Holder Committee represents that it collectively holds approximately 77% of the PIK Loan. As used in this Term Sheet, “PIK Holders” means all holders of the PIK Loan, including those who are Parties.

 
The Restructuring:

The Loan Settlement: In the Restructuring, the PIK Loan will be retired in its entirety in exchange for the PIK Holders receiving majority interest of the equity (common shares and preferred shares if issued) of the Company and in addition Company debt not exceeding 525 million euros of a five-year secured Note or the cash proceeds resulting from the sale of such securities (the “Loan Settlement Amount”). The interest rate on the Note will be at market, reflecting the average ratings of Standard & Poor’s and Moody’s.

 

Sponsor will contribute 10 million euros cash to be paid to the Company upon the effective date of the Chapter 11 Plan and will cause to be made the “RSR Contribution” (as defined below). In consideration the Sponsor (and its affiliates) will receive a minority interest of the equity (common shares and preferred shares if issued) of the Company.

 

For the avoidance of doubt, 100% of the Loan Settlement Amount would be provided to the PIK Holders on account of their interests in the PIK Loan, and no portion of the Loan Settlement Amount would be provided to any non-PIK Holder.

 

Funding: On the RSA Effective Date (defined below), the Sponsor will provide into an escrow account, 10 million euros for payment (the “Deposit”) for the benefit of the Company. The Deposit will be considered the Sponsor’s contribution in connection with the Loan Settlement Amount. The Deposit will only be refunded to the Sponsor should the Pre-Pack Chapter 11 Plan not be effectuated as a result of actions not caused by Sponsor.

 

RSR Contribution: On or before the effective date of the Plan, Sponsor will cause RSR Corporation to transfer to the Company all agreements relevant to Eco-Bat Technologies, including but not limited to necessary contracts, permits, IT, IP and technology systems.

 

The RSR Services Management Agreement including the entitlement to receive 5% of the pre-tax earnings of Eco-Bat Technologies and the New York, Indiana and California Plant Facilities Management Agreements (along with their incentive entitlements) will be transferred to the Company. Included in the transfers will be all employees, pensions and various fringe benefit programs currently being utilized to operate Eco-Bat America.

 

It is expected that the Company’s board and presumably the board members they elect to be nominees on the Eco-Bat Technologies board, will continue current personnel globally and will institute the necessary commitments and incentive programs.

 

Regarding Meyers position with the Company, he is amenable to serving the remainder of his employment contract as Chairman of Eco-Bat Technologies or an Executive Position mutually agreeable. Should the Consenting PIK Holders direct the Company to conduct a sale in bankruptcy pursuant to section 363 of the Bankruptcy Code rather than take the Loan Settlement Amount, Meyers commits to assisting.

 
RSA

RSA: As soon as practicable, but not later than 30 days from the date of this Term Sheet (unless extended with the express written consent of the Parties), the Company, Sponsor, and the Consenting PIK Holders would enter into the RSA, which would incorporate the terms set forth in this Term Sheet and such other terms and conditions as are customary for restructuring transactions of this type.

 

The RSA must be (i) in form and substance satisfactory to the Company, the Sponsor, and the Consenting PIK Holders and (ii) signed by Consenting PIK Holders constituting at least the holders of 95% in principal amount of the PIK Loan, which Consenting PIK Holders must include all PIK Holder Committee members (and their affiliates) and all other PIK Holders (and their affiliates) that are parties to the Nevada Litigation, and provided that the Company and Meyers may reduce the 95% threshold in their sole discretion. The RSA will become effective on a date (the “RSA Effective Date”) that is not later than five business days prior to the filing of a Bankruptcy petition.

 
Implementation

The Restructuring will be implemented through a pre-packaged plan of reorganization (“Plan”) under Chapter 11 of the United States Bankruptcy Code (a “Chapter 11 Case”) in which the Company is the debtor. The form of the Plan will be an exhibit to the RSA, and the Consenting PIK Holders, the Company and the Sponsor will agree to support the Plan in the RSA.

 

Mutual Release: Upon the RSA Effective Date, (i) all litigation among the Parties (the “Litigation”) would be dismissed with prejudice, and (ii) the Consenting PIK Holders, the Company, Meyers and each of their respective employees, directors, partners, advisors, representatives and affiliates would be granted full, unconditional and irrevocable mutual releases ((i) and (ii), together, the “Mutual Release”). The Mutual Release would require the release by (x) all parties to the Litigation and (y) PIK Holders representing at least 95% of the principal amount then outstanding of the PIK Loan: provided, however, that Sponsor and the Company would have the right, in their discretion, to reduce such 95% requirement.

 
Transaction Documents:

In addition to the RSA, the transaction documents would include, among others, an acquisition agreement, a loan modification/exchange agreement and such other agreements as are necessary to implement the Restructuring.

 

The transaction documents would contain representations, covenants, closing conditions and such other terms as are customary for transactions of this type.

 
Miscellaneous:

Fees/Expenses: After exiting Chapter 11 and the Company’s new board has been nominated by the Shareholders, the said new board will determine the Company’s reimbursement policy relating to the reasonable and documented fees and out-of-pocket expenses incurred by the professionals in this said matter.

 

Structuring: It is understood that this Term Sheet does not represent all of the material terms of the Restructuring and requires continued development by the Parties.

 

Nature of this Term Sheet: This Term Sheet is non-binding and may be withdrawn at any time. No Party is obligated to enter into or consummate any agreement. It is expressly understood that any restructuring or modification of existing agreements will require definitive written agreements executed by the Parties. No continued discussions, letters of intent, or other communications shall be deemed to create any such obligation. In no event shall this Term Sheet, the proposed terms of the Restructuring, the discussions with respect to this Term Sheet or any subsequent communications, letters of intent, draft documents or work product of the Parties or their respective employees, directors, affiliates or advisors or other representatives be used in any litigation, bankruptcy or other proceedings or constitute an admission of any kind.

 

Upon agreement and filing of a Pre-Pack Chapter 11 Plan and its acceptance by the Court, in accordance with the above terms and conditions, then after such filing and acceptance by the Court, and prior to the Effective Date of the Chapter 11 Plan, should the Consenting PIK Holders request, Sponsor is prepared to undertake an all cash transaction. Subsequent to successfully arranging the alternative all cash transaction, the original Pre-Pack Chapter 11 Plan submitted to the Court would be amended as defined in the terms and conditions enumerated below.

Should the Consenting PIK Holders request the all cash option and should Sponsor not successfully complete the transaction, the original restructuring filed under the Pre-Pack Chapter 11 Plan as enumerated above would continue to remain in effect.

EB HOLDINGS II, INC.

Summary of Key Alternative Restructuring Terms

THIS TERM SHEET (“TERM SHEET”) CONTAINS THE PRINCIPAL TERMS AND CONDITIONS OF A POTENTIAL RESTRUCTURING TRANSACTION (THE “ALTERNATIVE RESTRUCTURING”) AMONG (A) EB HOLDINGS II, INC., A NEVADA CORPORATION (THE “COMPANY”), (B) HOWARD M. MEYERS (“MEYERS” OR “SPONSOR”) AND (C) EACH OF THE BENEFICIAL OWNERS (OR INVESTMENT MANAGERS OR ADVISORS FOR THE BENEFICIAL OWNERS) OF THE COMPANY’S PIK LOAN FACILITY (THE “PIK LOAN”) IN THE ORIGINAL PRINCIPAL AMOUNT OF 600,000,000 EUROS WHO BECOME A PARTY TO A RESTRUCTURING SUPPORT AGREEMENT (THE “RSA”), AS DESCRIBED BELOW (COLLECTIVELY, THE “CONSENTING PIK HOLDERS”).

THIS TERM SHEET HAS BEEN PRODUCED FOR DISCUSSION AND SETTLEMENT PURPOSES ONLY. THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH RESPECT TO ANY LOAN INSTRUMENTS OR SECURITIES OF THE COMPANY. ANY SUCH OFFER OR SOLICITATION SHALL COMPLY WITH ALL APPLICABLE LAWS.

Parties:  

The parties to this Term Sheet (the “Parties”) are (i) the Company, (ii) Meyers, and (iii) certain holders of the PIK Loan who are managed accounts and/or affiliates of GoldenTree Asset Management LP, Alcentra Limited, Fortress Investment Group/Mount Kellet Capital Management, HIG Capital International Advisors LLP/Bayside Capital, Sound Point Capital Management, LP, and Värde Partners Europe Limited (such holders, collectively, the “PIK Holder Committee”). The PIK Holder Committee represents that it collectively holds approximately 77% of the PIK Loan. As used in this Term Sheet, “PIK Holders” means all holders of the PIK Loan, including those who are Parties.

 
The Restructuring:

In the Alternative Restructuring, the PIK Loan would be retired in its entirety in exchange for cash (the “Alternative Loan Settlement”). The Alternative Loan Settlement would be accomplished through a revised pre-arranged plan (the “Revised Plan”) in the case previously commenced by the Company under Chapter 11 of the United States Bankruptcy Code (the “Chapter 11 Case”).

 

The Alternative Loan Settlement: The Alternative Loan Settlement would be in an amount (the “Alternative Loan Settlement Amount”) equal to 625 million euros, consisting of all cash (the “Plan Funding”), which represents the final and maximum consideration the Sponsor and affiliates will consider. For the avoidance of doubt, this structure envisions the PIK Holders receiving all cash free of liability encumbrances. 100% of the Alternative Loan Settlement Amount would be paid to all the holders of the PIK Loan (the “PIK Holders”) on account of their interests in the PIK Loan and no portion of the Alternative Loan Settlement Amount would be paid to any non-PIK Holder.

 

For avoidance of doubt, upon the Alternative Transaction being consummated, 100% of the equity of the Company will be owned by the Sponsor (and affiliates).

 

Consensual Transfer: If Sponsor does not complete the Plan Funding, the original Pre-Pack Chapter 11 Plan above would continue to be in effect.

 

Mutual Release: For avoidance of doubt, the Alternative Restructuring contemplates as referenced above, upon the RSA Effective Date, (i) all litigation among the Parties (the “Litigation”) would be dismissed with prejudice, and (ii) the PIK Holders, the Company, Meyers and each of their respective employees, directors, partners, advisors, representatives and affiliates would be granted full, unconditional and irrevocable mutual releases ((i) and (ii), together, the “Mutual Release”). The Mutual Release would require the release by (x) all parties to the Litigation and (y) PIK Holders representing at least 95% of the principal amount then outstanding of the PIK Loan; provided, however, that Meyers and the Company would have the right, in their discretion, to reduce such 95% requirement.

 
Conditions to the Plan:

The Alternative Restructuring contemplated in this Term Sheet would be expressly conditioned upon confirmation of the Revised Plan (“Confirmation”) as referred to above.

 
Transaction Documents:

The transaction documents would include an acquisition agreement, a loan modification/exchange agreement and such other agreements as are necessary to implement the Revised Plan.

 

The transaction documents would contain representations, covenants, closing conditions and such other terms as are customary for transactions of this type.

 

There would be no adjustments in respect of the Alternative Loan Settlement Amount.

 

Structuring: It is understood that this Term Sheet does not represent all of the material terms of the Restructuring and requires continued development by the Parties.

 
Miscellaneous:

Fees/Expenses: The Company would reimburse the Consenting PIK Holders for the reasonable and documented fees and out-of-pocket expenses of the Consenting PIK Holders and their advisors relating to the negotiation, documentation, and consummation of the Restructuring and the Alternative Restructuring. Payments of such fees and expenses will be made immediately upon the Plan Effective Date, up to a cap for all such reimbursements of $8.5 million. For the avoidance of doubt, the amounts to be paid on account of such fees and expenses would be separate from the Alternative Loan Settlement Amount.

 

Nature of this Term Sheet: This Term Sheet is non-binding and may be withdrawn at any time. No Party is obligated to enter into or consummate any agreement. It is expressly understood that any restructuring or modification of existing agreements will require definitive written agreements executed by the Parties. No continued discussions, letters of intent, or other communications shall be deemed to create any such obligation. In no event shall this Term Sheet, the proposed terms of the Alternative Restructuring, the discussions with respect to this Term Sheet or any subsequent communications, letters of intent, draft documents or work product of the Parties or their respective employees, directors, affiliates or advisors or other representatives be used in any litigation, bankruptcy or other proceedings or constitute an admission of any kind.

 

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2. It should be noted that certain U.S. tax liabilities may arise if EBH II restructures the Loan.

In connection with any potential restructuring of EBH II’s indebtedness (whether out of court or in bankruptcy), there is a possibility that EBH II may realize material taxable income under certain U.S. federal income tax rules related to the treatment of foreign currency gains. Any such taxable income would arise because EBH II’s functional currency is the U.S. dollar and the Loan is denominated in Euros. Although not free from doubt, it is possible that such income may be partially or fully offset by tax attributes made available in connection with such restructuring. The foregoing statement does not constitute tax advice by EBH II, nor should it be relied upon by any person.

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For information contact: Teresa Zaidle at tzaidle@ebholdingsinc.com.

Contacts

EB Holdings II, Inc.
Teresa Zaidle, tzaidle@ebholdingsinc.com

Contacts

EB Holdings II, Inc.
Teresa Zaidle, tzaidle@ebholdingsinc.com