Ahern Rentals and its bondholders have reached an agreement to enable the company to exit Chapter 11 bankruptcy and avoid a possible shutdown over competing restructuring plans, according to court documents and media reports. Papers filed on May 25 with the U.S. Bankruptcy Court in Reno, NV reveal Ahern Rentals said its bankruptcy-exit financing has allowed it to improve payment terms for bondholders owed about $268 million.
The amended plan, which the bankruptcy judge will consider at a hearing scheduled for June 5, calls for the bondholders to receive immediate payment of $268 million in cash and the chance to receive another $25 million if Ahern Rentals changes hands within two years of emerging from Chapter 11. The bondholders would also receive $10 million to cover the legal fees they incurred in the bankruptcy case, which began when Ahern Rentals filed for Chapter 11 bankruptcy protection in December 2011.
Ahern Rentals’ previous plan would have given the bondholders new notes and $160 million in cash. The bondholders countered with their own plan, which would have given them equity in a restructured Ahern Rentals. The amended restructuring plan would keep ownership in the hands of Don Ahern, who owns 97 percent of the company. Ahern will have to invest $5 million in the company in exchange for that stake, reports say.
Court papers show that Judge Bruce Beesley allowed Ahern to enter into commitment letters for the two loans. Ahern obtained a $415 million senior secured loan to be arranged from Jefferies Finance LLC. Ahern said it would use the loan proceeds to pay about $380 million in debt owed to pre-bankruptcy lenders and bondholders.
Judge Beesley also gave Ahern Rentals permission to sign another $325 million exit-financing deal with a group of lenders including Bank of America Corp. The asset-based revolving credit facility will enable Ahern to pay off $224.6 million it owes under the loan it took out to fund its Chapter 11 case.