Sunlight Financial gets confirmation of pre-packaged Chapter 11 plan

By Sarah Lizee

Olympia, Wash., Dec. 6 – Sunlight Financial Holdings Inc. received confirmation of its pre-packaged Chapter 11 plan of reorganization, according to an order filed Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

The company is being acquired by a consortium of investors in the solar energy industry, including ED Umbrella Holdings, LLC, an affiliate of Greenbacker Capital Management, Sunstone, IGS Ventures and others, as well as its secured lender, Cross River Bank.

Sunlight also entered into a restructuring support agreement to reduce its debt while strengthening its balance sheet.

The company requested an expedited in-court process, with hopes to emerge from the proceedings in January.

As plan sponsor, ED Umbrella has agreed to make a direct investment of $15 million in the company in exchange for 87.5% of new equity in the reorganized company, subject to dilution by new equity to be issued under the management incentive plan and the conversion of any convertible notes following the effective date.

Cross River Bank agreed to provide a $10 million post-petition backstop facility to the debtor and exit financing to the reorganized company in the form of a $20 million convertible delayed-draw promissory note. The bank will receive 12.5% of the new equity in the reorganized company, subject to dilution.

Following the transaction, ED Umbrella and Cross River Bank will become the only holders of equity interests in the company and will each be entitled to a beneficial interest in the reorganized company’s assets.

If the debtors do not close the above transaction, the debtors will instead close an alternate transaction with Cross River Bank.

In this scenario, Cross River Bank would, in exchange for 100% of the new equity (subject to dilution) and certain cash payments, commit to a direct investment of the reorganized company and provide $20 million in exit financing in the form of delayed-draw notes convertible into new equity.

According to the disclosure statement filed with the prearranged plan, holders of other priority claims, other secured claims and general unsecured claims will receive full recovery.

Cross River Bank is expected to receive a recovery of 85.2%.

Intercompany claims will be reinstated, canceled, compromised or given other treatment as determined by the reorganized debtors.

Existing equity will be canceled.

Intercompany claims will be reinstated.

Sunlight Financial is a Charlotte, N.C.-based point-of-sale finance company that partners with contractors to provide homeowners with financing for the installation of residential solar systems and other home improvements. The company filed bankruptcy on Oct. 30 under Chapter 11 case number 23-11794.

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