US retailer gets bankruptcy loan with zero interest rate

Bloomberg

Competition to buy retailer Brooks Brothers Group Inc will allow the company to fund its reorganisation in bankruptcy with an $80 million loan that carries a zero interest rate and no closing fees.
ABG-BB LLC, a partnership between Authentic Brands Group LLC and mall landlord Simon Property Group Inc, will provide the loan.
The generous terms reflect competition between that group and WHP Global, a brand-buying company backed by distressed debt giant Oaktree Capital Management LP, Garrett Fail, the retailer’s lawyer, said during a court hearing.
“I’m convinced the terms will be the best that can be achieved,” Fail told US Bankruptcy Judge Christopher Sontchi during the company’s first court hearing, which was held by telephone.
Sontchi said he would sign an order allowing the company to initially borrow $60 million.
The company will return to court in the coming weeks to get permission to draw the rest of the money, which will be used
to fund operations case while Brooks Brothers tries to find a buyer.
Before filing for bankruptcy, Brooks Brothers had arranged a $75 million DIP loan from WHP Global, owner of the Joseph Abboud and Anne Klein brands. The new loan will provide $80 million, eliminate an early repayment penalty and give the company more time to close any sale arranged as part of the bankruptcy case, Fail said.
Lenders who make so-called debtor-in-possession loans often have an advantage when trying to buy a company out of bankruptcy. Such loans almost always carry a higher interest rate than a non-bankrupt company would be charged.
“This is a very favorable if not unprecedented economic DIP,” said Kelley A Cornish, a lawyer for ABG-BB, LLC the name of the joint venture between Authentic Brands and Simon Property.