Vyaire Medical obtained interim approval of a debtor-in-possession (DIP) financing facility from its prepetition lenders and other operational relief during a first day hearing today (11 June).

Judge Brendan Linehan Shannon of the US Bankruptcy Court for the District of Delaware granted interim access to the DIP, which includes USD 25m of new money and a USD 75m roll-up of prepetition debt. The DIP comprises a total of USD 45m of new money and a USD 135m roll-up of prepetition first lien term loans held by the DIP lenders.

J. Frasher Murphy of Haynes and Boone, representing prepetition administrative agent and collateral agent Bank of America, raised concerns with the roll-up component of the DIP priming its “modest” secured claim of about USD 1.36m. Being primed by the roll-up would turn  waterfall provisions in an intercreditor agreement and a prepetition credit agreement on its head, and fees incurred litigating the issues of the validity, enforceability and reasonableness of the agreements would not be modest, Murphy said. Bank of America reserved its rights with respect to the final DIP hearing in hopes of resolving the issue before then.

Vyaire, a manufacturer of respiratory products, filed for bankruptcy on Sunday (9 June) seeking to sell its assets. The company does not have a stalking horse at this time, but it is in talks with multiple parties, according to its first day papers. Vyaire will pursue a July sale process anchored by an auction on 24 July. The debtors’ case is backed by a restructuring support agreement (RSA) with the majority of Vyaire’s first lien lenders holding 90% of the first lien debt, second lien lenders holding 100% of the second lien facility and a sponsor comprising funds advised by Apax Partners.

Judge Shannon also granted the debtors’ motions regarding joint administration, cash management, critical vendors, wages, customer programs, insurance, utilities, the redaction of individuals’ personally identifiable information, taxes and notification and hearing procedures for certain transfers of and declarations of worthlessness with respect to common stock. The judge signed off on the appointment of Omni Agent Solutions as claims and noticing agent, as well.

A second day hearing is set for 9 July.

Upon filing for bankruptcy, Vyaire pointed to post-COVID-19 pandemic macroeconomic challenges like higher interest rates, inflationary pressures and supply chain disruptions as factors contributing to its decline. The company moved to right-size its overhead costs and retained professionals to improve its balance sheet prior to filing for bankruptcy, but Vyaire’s liquidity position worsened, which killed a potential “amend-and-extend transaction,” according to the company’s first day papers.