| Item 1.01 | Entry into a Material Definitive Agreement. |
As previously disclosed, on September 20, 2020 (the “Petition Date”), Garrett Motion, Inc. (the “Company”) and certain of its subsidiaries (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Debtors’ chapter 11 cases (the “Chapter 11 Cases”) are being jointly administered under the caption “In re Garrett Motion Inc., 20-12212.” On October 6, 2020, the Bankruptcy Court entered an order (the “Interim Order”) granting interim approval of the Debtors’ entry into a Senior Secured Super-Priority Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”), with the lenders party thereto (the “DIP Lenders”) and Citibank N.A. as administrative agent (the “DIP Agent”). On October 9, 2020 (the “Closing Date”), the Company, the DIP Agent and the DIP Lenders entered into the DIP Credit Agreement. The DIP Credit Agreement provides for a senior secured, super-priority term loan (the “DIP Term Loan Facility”) with a maximum principal of $250 million to be funded in two borrowings as follows: (a) $100 million following the entry of the interim order approving the DIP Credit Agreement and (b) $150 million following the entry of the final order approving the DIP Credit Agreement, in each case, subject to the terms and conditions described therein. The proceeds of the DIP Term Loan Facility are to be used by the Debtors to (a) pay certain costs, premiums, fees and expenses related to the Chapter 11 Cases, (b) make payments pursuant to any interim or final order entered by the Bankruptcy Court pursuant to any “first day” motions permitting the payment by the Debtors of any prepetition amounts then due and owing; (c) make certain adequate protection payments in accordance with the DIP Credit Agreement and (d) fund working capital needs of the Debtors and their subsidiaries to the extent permitted by the DIP Credit Agreement.
The maturity date of the DIP Term Loan Facility is the earlier to occur of (a) March 31, 2021 (the “Scheduled Maturity Date”); provided, however, that upon the Borrower’s written request such Scheduled Maturity Date can be extended by three separate one-month extensions subject to (i) the payment of an extension fee to the Lenders equal to 0.50% of the principal amount of the Loans outstanding at the time of such extension, (ii) no default or Event of Default (as defined in the DIP Credit Agreement) existing at the time of such extension and (iii) accuracy of the representations and warranties in all material respects at the time of such extension and after giving effect thereto; (b) 40 days after entry by the Bankruptcy Court of the interim order approving the DIP Credit Agreement, if the final order approving the DIP Credit Agreement has not been entered prior to the expiration of such 40-day period; and (c) the effective date of a plan of reorganization; and certain other events under the DIP Credit Agreement.
The outstanding principal amount under the DIP Term Loan Facility will bear interest at a rate, equal to (x) prior to March 31, 2021, request that the Lenders extend the Existing Maturity Date in accordance with this Section by up to three separate one-month extensions LIBOR (subject to a 1.00% LIBOR floor) plus 4.50% per annum and (y) following March 31, 2021 if the Scheduled Maturity Date (as defined in the DIP Credit Agreement) has been extended at such time, LIBOR (subject to a 1.00% LIBOR floor) plus 5.50% per annum, in each case, compounded monthly and payable every 30 days in arrears. On the Closing Date, the Company paid 1.00% in commitment fees on the total commitment plus 2.00% in fees in the form of original issue discount on the initial commitment and on the delayed draw borrowing, date the Company will pay 2.00% in the form of original issue discount on the delayed draw loans. Upon an event of default, all outstanding amounts under the DIP Credit Agreement will bear interest at a rate equal to the applicable interest rate plus an additional 2.00% per annum and be payable on demand.
Pursuant to the terms of the DIP Credit Agreement, certain subsidiaries of the Company that guarantee the obligations arising under the Prepetition Credit Agreement and that are Debtors in the Chapter 11 Case will guarantee the Company’s obligations under the DIP Credit Agreement. Subject to certain exceptions, the DIP Term Loan Facility will be secured by a security interest in substantially all of the assets of the Company and the guarantors. The DIP Financing is subject to certain covenants, including, without limitation, related to the incurrence of additional debt, liens, the making of restricted payments, and the Company’s failure to comply with certain bankruptcy-related covenants, in each case as set forth in the DIP Credit Agreement. The DIP Credit Agreement contains representations, warranties and events of default that are customary for debtor-in-possession facilities of this type. The DIP Financing is subject to certain prepayment events, including, without limitation, upon the sale of certain assets, in each case as set forth in the DIP Credit Agreement.
The DIP Facility is subject to final approval by the Bankruptcy Court.
The foregoing description of the DIP Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the DIP Credit Agreement filed as Exhibit 10.1 hereto and incorporated herein by reference.
