Pacific Capital Funding Group - Chapter 11 DIP Terms

DIP Terms

Size

• Up to $4 million of aggregate postpetition interdebtor borrowing, measured as the cumulative funds advanced by all debtors, collectively, to any other debtors after entry of the interim order, approved on a final basis by order signed Oct. 1, 2026.
• The debtors may enter into the interdebtor loans and draw advances without further court order, subject to the budget.
• The structure is unsecured and intercompany: there is no roll-up and no lien grant, and the lending debtors' sole consideration is an allowed administrative expense claim under section 364(b); the order fixes no interest rate or lender fee, though it authorizes the debtors to pay fees necessary to perform their obligations and directs that repayments apply to principal and, as applicable, accrued interest.
• Borrowing beyond the $4 million cumulative cap proceeds on negative notice rather than by further motion:
  • The debtors email a reborrowing notice to counsel to the committee, counsel to Saluda Grade Mortgage Funding LLC and certain affiliates, and the U.S. Trustee, stating that cumulative interdebtor borrowing has exceeded $4 million, the amount of reborrowing anticipated, a brief summary of the purposes for the funds, and a copy of the most current interdebtor loan ledger.
  • Any party in interest may object by email within 10 days of service of the notice; absent an objection, the reborrowing is approved.
  • The debtors may respond to an objection and set it for hearing on not less than 10 days' notice, subject to the court's authority to shorten time for exigent circumstances.

Borrower(s) / Lender(s)

• All 13 debtors are authorized to borrow: Pacific Capital Funding Group Inc., Pacific Private Money, Inc., Private Money Management Group LLC, Pacific Mortgage Capital, LLC, Pacific Southwest Note Fund LLC, Pacific Private Money Partners LLC, Pacific Private Money Group LLC, Pacific Private Money Fund 1 LLC, Pacific Opportunity Fund LLC, Pacific Note Fund Management Group LLC, Pacific Freedom Fund LLC, Arrival Home Loans LLC and Arrival Fund I, LLC.
• The order does not name the lenders or define "lending debtors"; under the ledger mechanics, a debtor that funds more than its allocated costs holds an interdebtor receivable and one that funds less owes a payable, so any debtor may end up on either side of the facility.

Need for the Financing

• The debtors are no longer operating their business and continue to manage their properties and assets.
• The court found that the debtors could not obtain adequate unsecured credit allowable as an administrative expense under section 503(b)(1), credit with priority over administrative expenses of the kind specified in sections 503(b) or 507(b), or financing from other sources on more favorable terms, and that the interdebtor loans resulted from a competitive process the debtors conducted.
• Without the loans, the court found, the debtors would be forced to liquidate and would lose the prospect of maximizing asset value for a possible sale.

Use of Proceeds

• Payment of the fees, costs and expenses authorized by the order.
• The debtors' working capital needs as itemized in the budget.

Budget and Permitted Variance

• Variances of 10% in the aggregate against the budget are permitted.

Administrative Claim and Priority

• The lending debtors receive an allowed administrative expense claim under section 364(b) for all obligations, granted upon entry of the final order and effective as of the petition date; the claim is treated as a section 503(b) administrative expense claim for purposes of section 1129(a)(9)(A) and is payable from and has recourse to all pre- and postpetition property and assets of the debtors.
• The claim is enforceable against the debtors, their estates, and any trustee or other estate representative appointed in these cases, in any successor Chapter 7 cases, or upon dismissal, and is not subject to sections 510, 549, 550 or 551; the obligations are not subject to any defense, reduction, subordination, setoff, recoupment or counterclaim, and are not voidable or recoverable.
• The financing and the related administrative claim obligations do not affect, impair or diminish any secured claim allowed against any debtor.
• The lending debtors need not file proofs of claim for claims allowed under the order, may file, amend and supplement them at their sole discretion, and are exempt from any bar date order entered in these or any successor cases, with any such proof of claim additive to any other they may file.

Repayment, Allocation and True-Up

• The order sets no fixed maturity date; repayment runs through the allocation and true-up mechanics, which the order treats as an integral part of the repayment terms, and the obligations continue until indefeasibly paid in full in cash.
• The source of the cash advanced determines only which debtor funds the cases initially, not ultimate economic responsibility, which is set by the allocation and periodic true-up procedures:
  • Direct costs: an administrative expense reasonably identified as incurred solely for the benefit of, or directly attributable to, a particular debtor or its assets is allocated to that debtor.
  • Shared case costs: expenses not reasonably attributable to a particular debtor are allocated by relative asset value, meaning each debtor's cash plus the estimated net orderly liquidation value of its remaining assets, as determined by the debtors in good faith on information reasonably available as of the measurement date, with interdebtor receivables and payables excluded to avoid circularity.
  • Monthly review: the debtors update cash and net orderly liquidation value per debtor, direct and shared case costs for the period, resulting allocation percentages and resulting repayment obligations; estimated asset values need not be independently reappraised monthly but are adjusted in good faith for material developments, including asset sales, binding bids or purchase agreements, material changes in collateral value and foreclosures.
  • Ledger: the debtors maintain a per-debtor ledger of amounts advanced, direct costs allocated, shared case costs allocated, repayments made or received, and the resulting net interdebtor receivable or payable; a debtor funding more than its allocated costs holds a receivable, one funding less owes a payable, and the net ledger amounts following each true-up govern repayment.
• True-ups occur no less frequently than quarterly and, additionally, within 30 days after any debtor receives cumulative net asset-sale proceeds in excess of $2 million since the most recent true-up, and in all events before any material distribution of such proceeds to creditors or interest holders.
• Following each true-up, a debtor with a net payable repays from available cash, including sale or monetization proceeds, subject to maintaining liquidity reasonably necessary to fund the approved budget and preserve its estate; where more than one lending debtor holds a net receivable, repayments are allocated pro rata by outstanding net receivables unless the affected debtors and the committee agree otherwise or the court orders otherwise.
• Once a debtor satisfies its then-outstanding net payable, its remaining proceeds stay with it and need not be paid over to another debtor merely because that debtor previously funded the cases, subject to later allocation and true-up.
• A final allocation and true-up is performed as of the effective date of any confirmed plan, immediately prior to any conversion of one or more cases to Chapter 7, or at such other time as the court orders, with the resulting net receivables and payables booked as the then-outstanding obligations, subject to further order or plan treatment.

Key Dates

• Petition date: June 16, 2026, in the Bankruptcy Court for the Northern District of California
• Committee appointment: July 8, 2026
• Motion dated: Aug. 19, 2026 (dkt. no. 112)
• Initial hearing: Sept. 8, 2026
• Final hearing: Sept. 23, 2026
• Final order: signed Oct. 1, 2026, with the docket reflecting entry Oct. 2, 2026

Reservations and Challenge Rights

• The order makes no finding that any alleged liens are valid, senior, enforceable, prior, perfected or non-avoidable, and preserves every party in interest's right to challenge the validity, priority, enforceability, seniority, avoidability, perfection or extent of any alleged lien, without setting a deadline to do so.
• The allocation, repayment and true-up methodology is an interim mechanism pending further order, and no allocation, true-up, advance, repayment, receivable or payable recorded under it constitutes a determination on substantive consolidation, ownership of any asset, the ultimate allocation of administrative expenses under a plan, or the allowance, priority, characterization or treatment of any other intercompany claim; the rights of the debtors, the committee and other parties in interest are expressly reserved.
• A lending debtor's failure to require strict performance or to exercise remedies is not a waiver, and no right or remedy is amended, modified, suspended or waived absent a writing signed by the party against whom enforcement is sought; the order creates no third-party rights.
• Where the order conflicts with the motion, any other court order or any other agreement, the order governs unless the relevant provision is phrased as "as defined in" or "as set forth in" the loan documents.
• The court considered the committee's response to the motion and overruled any objections not withdrawn or resolved; the final order was approved as to form by counsel for Saluda Grade Mortgage Funding LLC and certain affiliates and by counsel for the committee, each on Sept. 30, 2026.

Survival and Discharge

• The order and actions taken under it survive, and are not modified, impaired or discharged by, entry of an order confirming a Chapter 11 plan, converting the cases to Chapter 7, dismissing the cases, withdrawing the reference, or providing for abstention, remaining in full force with priorities intact until the obligations are indefeasibly paid in full in cash, with the court retaining jurisdiction to enforce notwithstanding dismissal.
• The obligations are not discharged by confirmation notwithstanding section 1141(d) unless indefeasibly paid in full in cash on or before the plan's effective date, or the lender otherwise agrees in writing.
• The lending debtors are entitled to section 364(e) protection if the order is modified, vacated, reversed or stayed.