Veria Lifestyle - Chapter 11 DIP Terms

DIP Terms

Borrower

• Veria Lifestyle Inc., a Delaware corporation that operates the YO1 Center, a natural wellness center in Monticello, N.Y., filed Chapter 11 in the District of New Jersey on Oct. 2, 2026.

Lender

• Natural Wellness UK Limited, as DIP lender, an insider identified in the motion as the parent of the debtor's 100% equity owner

DIP Commitments

• $1.75 million junior-lien post-petition facility under the DIP loan and security agreement dated Oct. 2, 2026, with up to $700,000 available on an interim basis and the balance on entry of a final order.
• There is no roll-up of prepetition debt. The motion states the facility carries no representations, warranties or financial covenants, though the loan agreement includes inventory and equipment representations and operating covenants barring mergers, asset sales outside the ordinary course and additional liens, and requiring financial information on the DIP lender's request.
• Each draw requires a written request on two business days' notice, a payment schedule approved by the DIP lender, the approval of both the debtor and the DIP lender, a note, and entry of a final DIP order acceptable to the DIP lender in its sole discretion; the loan agreement thus conditions all funding on the final order, though the motion seeks $700,000 on an interim basis.

Interest Rate

• 12%, computed on an actual/360 basis and payable at maturity and on any principal repayment; overdue amounts bear default interest at 20%.

Fees

• None. The DIP lender is charging no fees, points or expenses in connection with the loan.

Maturity

• The motion describes the facility as maturing one year after entry of a final order; under the DIP loan agreement, that one-year date, extendable by agreement, is the commitment termination date, while the maturity date is the earlier of the closing of a sale of substantially all assets under court-approved bid procedures and the effective date of a confirmed Chapter 11 plan. The proposed interim order makes all DIP obligations immediately due on the earliest of a 2027 date left incomplete in the order, the plan effective date, a sale closing under bid procedures, or an event of default.

Securities and Priorities

• Under the proposed interim order, the DIP lender receives a first-priority lien under section 364(c)(2) on all unencumbered property and a second-priority lien under section 364(c)(3) on encumbered property, junior only to valid, perfected liens existing at the petition date, including the senior mortgage securing the June 22, 2016 building loan agreement with Canara Bank, New York Branch, whose mortgagees are Canara Bank, New York Branch and Union Bank of India; both tiers are subject to the Carve-Out, and the DIP liens rank ahead of any avoided liens preserved for the estate and of postpetition liens, including governmental liens. The motion states the relief has no effect on existing liens.
• Superpriority claims under section 364(c)(1) with priority over all administrative expenses other than the Carve-Out.
• Granting any lien senior to or pari passu with the DIP lender's lien is an event of default under section 8.1(i) of the DIP loan agreement.

Carve Out

• The proposed interim order subordinates the DIP liens and superpriority claims to a carve-out for allowed reasonable fees and expenses of debtor and committee professionals, and committee members' disbursements, incurred before termination of the facility; U.S. Trustee quarterly fees and clerk fees; and reasonable fees and expenses of a trustee under section 726(b), capped at $25,000. Only the trustee component is capped, and the loan agreement's own definition covers allowed fees of debtor-retained professionals only.

Use of Proceeds

• Fund ordinary course business operations and other administrative claims as the debtor seeks to emerge from Chapter 11
• Provide working capital and liquidity to preserve the going concern value of the estate

Cash Collateral

• The debtor seeks authority under section 363(c) to use cash collateral on an interim basis in accordance with the budget, which contemplates $700,000 of funding pending the final hearing.
• The debtor states that without immediate access it would face an acute cash shortage threatening operations even before the final hearing, with resulting cessation of operations and diminution in the value of the prepetition collateral.

Adequate Protection

Existing Secured Lenders

• The proposed interim order grants holders of valid liens as of the petition date, including the senior mortgagees, a replacement lien on all presently owned and after-acquired property in the same priority as before the petition date, excluding avoidance actions and their proceeds and subject to the Carve-Out; the motion also refers to interest payments, but the proposed order provides only the replacement liens.
• The debtor states that it will operate on postpetition revenue and that the budget shows the existing secured lenders' collateral position will remain at least status quo over the budget period.

Avoidance Actions

• The DIP liens do not attach to proceeds of Chapter 5 avoidance actions (proposed interim order ¶ 12(d)), and the adequate protection replacement liens likewise exclude avoidance claims and their proceeds; however, the DIP lender's superpriority claims have recourse to all property of the debtor, expressly including proceeds of avoidance actions.

Events of Default and Remedies

• Beyond the priming-lien default, the DIP loan agreement's events of default include:
  • failure to pay any amount when due or to perform any term of the loan documents;
  • failure to obtain entry of the final DIP order by the commitment termination date, or the final order ceasing to be in effect or being stayed, reversed or modified in a way the DIP lender reasonably determines is adverse, without its consent;
  • any event that has had or could reasonably be expected to have a material adverse effect;
  • the debtor filing a Chapter 11 plan the DIP lender has not consented to;
  • any sale of all or substantially all assets not conducted under bid procedures acceptable to the DIP lender in its sole discretion;
  • the debtor filing or supporting a motion for any superpriority claim or lien senior to or pari passu with the DIP obligations;
  • dismissal of the case or conversion to Chapter 7; and
  • appointment of a Chapter 11 trustee or an examiner with enlarged powers.
• On an event of default the DIP lender may accelerate by written notice, and its collateral remedies, including taking possession of and selling or licensing collateral, are subject to bankruptcy court approval; under the proposed interim order an event of default is also a termination date on which all DIP obligations become immediately due.
• The DIP lender may credit bid its obligations in any disposition of collateral under the loan agreement's remedies provisions.
• The debtor waives, under section 1141(d)(4), any discharge of the DIP obligations by plan confirmation, and the DIP lender's superpriority claim and liens survive a confirmation order.

Waivers and Omitted Protections

• The facility includes no section 506(c) waiver, no stipulation binding the debtor or other parties as to the validity, perfection or amount of the lender's prepetition claim, and no waiver of claims against the lender.
• The DIP lender is not requiring provisions the motion describes as common to DIP financings, including a waiver of the automatic stay, milestones, deadlines, indemnity, releases, or a lien on avoidance actions, and the facility carries no sale or plan-filing deadlines, no change-of-control provision and no cross-collateralization; the DIP lender nonetheless controls both exits through events of default triggered by a plan it has not consented to or a sale outside bid procedures it finds acceptable.

Marketing and Alternatives

• The debtor sought refinancing for over three years before the petition date and received limited interest; four potential investors or lenders were given data room access, and the debtor signed a term sheet with a single lender that never ripened into a loan agreement.
• The debtor states it could not obtain post-petition credit as an administrative expense under section 503(b)(1), unsecured credit under sections 364(a) and 364(b), or junior secured credit under section 364(c)(3), and that no third-party lender would match the DIP lender's junior lien position or its readiness to close immediately without meaningful diligence.
• The debtor acknowledges that the insider status of the DIP lender subjects the transaction to heightened scrutiny.

Case Status

• No committee has been appointed.
• The relief is sought on an emergency basis under Bankruptcy Rule 6003; no order has yet been entered.