Covanta Energy has received interim approval for its Deutsche Bank and Bank of America-led $290 million debtor-in-possession financing after its sports ventures and maturing debentures caused the company to file for Chapter 11 bankruptcy last month. The DIP facility is a 12-month facility including a $242 million tranche that incorporates existing letters of credit. The remaining $48 million tranche includes $34 million for cash withdrawals and $14 million for new letters of credit. Bob Shapard, company executive v.p. and cfo, declined to disclose pricing on the deal.
The company had a $650 million pre-petition revolver led by Deutsche Bank and B of A that was used for cash purposes and also as a backstop for the letters of credit prior to the DIP. After distressed preferred shareholders put shares back to the company, $105.5 million of the company's letters of credit were funded, explained Shapard. He added that it was the credit drain associated with this event and the $148.65 million of subordinated convertible debentures maturing in June and October 2002 that caused the company to file for bankruptcy.
The company has been working on refocusing away from its non-core businesses toward its primary energy businesses. It has also obtained a letter of intent from Kohlberg Kravis Roberts & Co. for a $225 million equity injection. Shapard noted that KKR's support reflected positively on the company's restructuring plans.
KKR is still in the process of completing its due diligence and no restructuring decision has been made concerning the company's bank debt. Final approval for the DIP financing is expected at a May 7 hearing.