GRMG Real Estate L.L.P. - Plan / RSA Terms

Plan / RSA Terms

Overview

• The debtors, GRMG RE and DMB-GRMG, entered into a Restructuring Support Agreement, or RSA, with parties that collectively hold all of the debtors’ secured and unsecured debt.
  • The supporting parties include Premier Bank, Fidelity Bank, Apple River State Bank, Dr. Mark Liaboe and Dr. Randall Lengeling.
• The RSA provides the framework for the debtors’ chapter 11 plan.

Restructuring Transactions

• Pursuant to the RSA and the plan, certain of the debtors’ real estate assets will be conveyed to two newly formed entities, NewCo One and NewCo Two.
  • The Westmark Property and the debtors’ interest in the 1515 Property will be transferred to NewCo One.
  • The Pediatric Suite Property, Nephrology Suite Property, Richland Center Property and Platteville Property will be transferred to NewCo Two.
• Concurrently with the asset transfers on the effective date, Premier Bank will cancel the existing GRMG Real Estate Loans, and Premier and Fidelity Bank will issue new loans to NewCo One and NewCo Two.

Treatment of Claims

• Class 1 Prepetition Secured Claims held by Premier Bank will be exchanged for:
  • Up to $9.1 million in cash from the proceeds of the NewCo One Loan; and
  • The NewCo Two Loan in an amount up to $4.6 million.
• Class 3 Prepetition Unsecured Redemption Claims held by Dr. Randall Lengeling and Dr. Mark Liaboe will each receive a replacement promissory note and a second-priority mortgage on the Pediatric Suite Property.
  • The value of the replacement notes will be equal to their prepetition claims of $336,346 each, less a 10% discount.
  • The 10% discount represents a settlement of any and all potential avoidance actions the debtors may have against the doctors.

NewCo One Loan

• On or before the effective date, NewCo One will enter into a new loan with Fidelity Bank in a principal amount of up to $9.1 million. The loan terms include:
  • Interest Rate: 7% per annum.
  • Amortization: 25 years.
  • Maturity: Five years from the effective date.
  • Collateral: A first-priority mortgage on the Westmark Property, a pledge of NewCo One’s 88% partnership interest in DMB, an assignment of the 1515 Mortgage, and a first-priority security interest in all of NewCo One’s personal property.

NewCo Two Loan

• On or before the effective date, NewCo Two will enter into a new loan with Premier Bank in a principal amount of up to $4.6 million. The loan terms include:
  • Interest Rate: 7% per annum.
  • Amortization: 20 years.
  • Maturity: Five years from the effective date.
  • Collateral: First-priority mortgages on the Nephrology Suite, Pediatrics Suite, Richland Center and Platteville properties, and a first-priority security interest in all of NewCo Two’s personal property.

Plan Support

• The RSA parties were actively involved in the plan’s formulation and believe it provides the highest and best recoveries while preventing a value-destructive liquidation.
• Pursuant to the RSA, holders of allowed secured claims and unsecured redemption claims have consented to their treatment and impairment under the plan.

Prepetition Actions

• In accordance with the RSA, the debtors used proceeds from the UPH Transaction, the JWDR Transaction and accounts receivable to pay down all direct outstanding indebtedness owed to Premier Bank, other than certain guaranty obligations.
• As a result of these prepetition paydowns, the debtors expect their liability to Premier to be approximately $12.6 million as of the petition date.

Other Terms

• Under the RSA, Premier Bank has consented to the debtors’ use of cash collateral in the ordinary course of business.
• Premier has also agreed to allow the debtors to reserve up to $125,000 from the sale proceeds of the Lake Ridge Property for a tax distribution to the GRMG Group Owners.

Termination

• The RSA may be terminated upon the occurrence of certain events, including:
  • The debtors’ failure to make payments under the loans to Premier;
  • The conversion or dismissal of the chapter 11 cases; or
  • Failure to confirm the plan within 45 days of the petition date.

Releases

• The plan provides for customary releases by the debtors, their estates, successors and assigns for the benefit of the released parties.
• The plan also provides for releases by the releasing parties for the benefit of the released parties.