(Bloomberg) -- Franchise Group Inc. won temporary court permission to borrow as much as $250 million from its senior lenders in order to keep operating while the bankrupt, brand management firm tries to cut debt and sell itself.
Bankruptcy Judge John Dorsey overruled objections from two lower ranking creditors — bond-giant Pacific Investment Management Co. and Irradiant Partners LP — who said they were willing to provide an alternative loan with fewer fees and a lower interest rate, but would not give Franchise as much cash as the company needs to get through its Chapter 11 case.
Judge Dorsey agreed to temporarily approve the $250 million financing after initially declining to, because the lenders agreed to reduce some of the fees on the loan among other changes, according to a court hearing Wednesday.
Franchise Group will have immediate access to $100 million in cash from the loan, but must return to court in the coming weeks to win final approval of the financing package and score access to the entire loan. With the package, the company will also refinance $500 million of older debt.
The company entered Chapter 11 with approximately $2 billion in debt and a plan for senior lenders holding about half of that, including HPS Investment Partners, Garnett Station Partners, HG Vora Capital Management and Arena Capital Advisors, to take ownership of the B. Riley Financial Inc.-backed business in its restructuring, according to people with knowledge of the negotiations.
Pimco and Irradiant have opposed the $250 million loan and the broader deal with senior lenders, arguing their junior positions will be wiped out by the reorganization proposal.
Franchise Group will test the value of its deal with senior lenders by marketing the company’s main assets, company attorney Matthew A. Feldman said in court Tuesday.
The case is Franchise Group Inc., 24-12480, in the US Bankruptcy Court for the District of Delaware.
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