EYP Group files Chapter 11 with $67.7 million stalking horse bid

By Sarah Lizee

Olympia, Wash., April 25 – EYP Group Holdings, Inc. and seven affiliates filed Chapter 11 bankruptcy on Sunday in the U.S. Bankruptcy Court for the District of Delaware.

Kefalari L. Mason, interim chief executive officer of EYP, said the company has been actively engaged in out-of-court attempts to consensually restructure its balance sheet for almost three years.

However, in large part due to the number and various tranches of stakeholders as well as their divergent interests, EYP hasn’t been able to identify a consensual solution, and instead has found itself “entangled in a further deteriorating situation” with its noteholders, and mounting liabilities that threaten the company’s financial and operational position, Mason said.

EYP currently owes about $142 million under promissory notes issued as part of an employee stock ownership plan.

“After nearly three years of failed out-of-court negotiations and with the senior secured facility and a number of other notes now matured, the debtors have determined that preserving and maximizing the value of the company for the benefit of its employees, clients, vendors, noteholders and other stakeholders would be best accomplished through a sale of all or substantially all of the company’s assets,” Mason said in the declaration.

EYP has entered into a stalking horse agreement with senior secured lender Ault Alliance, Inc., a private equity firm owned by BitNile Holdings, Inc., formerly known as Ault Global Holdings, Inc.

Mason said that during the marketing process, the company was under intense pressure from its former senior secured lenders, led by KeyBank, NA, due to the maturity of a senior loan facility on June 28, 2021. During negotiations of a letter of intent with the company, Ault purchased the matured senior secured debt at par from the secured lenders to lessen the pressures, allowing for the time to conduct the necessary diligence and negotiate sale documents, and to minimize the risks of adverse actions against the company.

Ault has agreed to provide a $5 million new money debtor-in-possession financing to provide the debtors with enough liquidity to operate their businesses and fund the Chapter 11 sale process. The loan will bear interest at 12% per annum and mature on June 30. There is a 2% commitment fee and a 2% exit fee.

The company is seeking interim access to $2.5 million of the new money.

The DIP facility will include a roll-up of $6.54 million of prepetition secured debt, with half available following an interim order, and the other half available following a final order.

The purchase price under the stalking horse agreement is $67.7 million, which consists of a credit bit of up to $11.75 million, consisting of the amount under the DIP facility and the full amount of the debt owed under the senior secured facility, with the remainder of the consideration consisting of cash and assumed liabilities.

Under the proposed bid procedures, bids are due by 4 p.m. ET on June 3, an auction, if needed, will be held on June 8, and a sale hearing will take place on June 14.

The minimum initial overbid is set at $500,000, with minimum overbid increments set at $250,000.

Bid protections under the stalking horse agreement include a $2 million breakup fee and an expense reimbursement of up to $900,000.

EYP has filed several first-day motions, including one seeking approval to access the cash collateral that Ault has an interest in.

The company listed $50 million to $100 million in assets and $100 million to $500 million in liabilities.

Its largest unsecured creditors are Tom Birdsey, with a $15.61 million unsecured note claim, the Thomas G. McDougall Trust, with a $5.87 million unsecured note claim, David Watkins, with a $5.07 million unsecured note claim, Marilyn Watkins, with a $5.07 million unsecured note claim, Karen Birdsey, with a $5 million unsecured note claim, Peter Ottavio, with a $4.79 million unsecured note claim, and Leila Kamal, with a $4.02 million unsecured note claim.

DLA Piper LLP (US) is the debtors’ counsel.

Albany, N.Y.-based EYP is an integrated design firm specializing in higher education, health care, government and science & technology. It filed bankruptcy under Chapter 11 case number 22-10367.

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