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The Deal.com
Tuesday, August 14, 2001
Bankrupt Snyder Lands DIP Loan
By Terry Brennan
Bankrupt Snyder Home Builders, which has been clamoring for a debtor-in-possession loan to stave off a hostile liquidation challenge by secured creditors, has landed a $3 million DIP from Naples, Fla.-based Cypress Lending Group.
Snyder believes that the DIP funding will be enough to undermine the creditor’s move to liquidate and force a settlement involving the fraudulent conveyance allegations levied against management, according to the company’s attorney, Henry Shelton of Armstrong Allen in Memphis.
“I also think this funding will be enough to continue operations, but everything about DIP financing is always disputed”, Shelton said.
Snyder will present the commitment for $3 million to Judge William Brown at a U.S. Bankruptcy Court hearing Aug. 24 in Memphis.
Memphis-based Snyder’s 11-th hour search for financing was running parallel to a challenge to liquidate by both creditors and the U.S. Trustee’s Office. The secured creditors are also alleging that Snyder made fraudulent conveyances on home sales involving 20 wholly owned, real estate-related bankrupt entities. Snyder filed for bankruptcy April 16.
Mark Snyder and Richard Snyder, the owners of Snyder, also individually filed for personal bankruptcy, and motions to dismiss those filings will be heard Aug. 24.
“The main reason we decided to go ahead with the financing is because the disclosures in the court were showing that the collateral has been appraised at $30 million and then interest would be capitalized for the term of the loan”, said Cypress president Bob Grammen. “About 20 Snyder entities filed, and we have most, but not all, to use as collateral, and we decided it was worth the risk to breathe new life into the company."
The company will file a motion today to protect the $35,000 fee that Cypress is charging on the DIP.
Cypress required Snyder to file the commitment fee as an administrative claim. It did so for added protection, Grammen said, since Snyder has generated less than $1 million in revenue in court-approved home sales since its filing and its coffers are almost bare.
“We’ve asked Snyder to file our $35,000 commitment fee as an administrative claim to protect our costs because they’re pretty strapped for cash and a secured lender could come forward with higher DIP funding”, Grammen said. “This way our claim will be right behind secured claims, and we want to make sure we get paid to cover our costs, at the very least.”
Cypress was spun off and funded by parent EFO Holdings/Naples Lending of Dallas three years ago and has an existing DIP agreement with bankrupt Phoenix Biocomposites LLC of Mancado, Minn., Grammen said. That $3 million DIP package came with a $50,000 commitment fee. He would only say that both the Phoenix and Snyder packages were provided at market rates.
EFO Holdings/Naples Lending has provided more than $700 million in distressed debt financing in the past 10 years, including a recent DIP funding for Twin Eagles golf course in Naples, Fla., and targets DIP loans in the $500,000 to $8 million range, according to its web site.
“DIP lending is a great business, and we’ll do just about anything as long as the collateral well exceeds our loan,” said William Esping, principal at EFO Holdings/Naples Lending.
Jordi Guso at Berger Singerman in Miami is counseling Cypress on the DIP agreement.
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