Contract analysis

1. On June 20, 2022 (the "Petition Date"), the Debtors each filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, commencing these jointly administered cases. The Debtors continue to manage and operate their businesses as debtors in possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. No trustee, examiner, or statutory committee of unsecured creditors has been appointed in the

2. By this Motion, the Debtors seek authority to enter into a $30.0 million senior secured superpriority revolving debtor-in-possession credit facility (the "DIP Facility") with Ridgeline National Bank, N.A., as administrative agent (in such capacity, the "DIP Agent"), and the consenting first lien lenders party thereto from time to time (the "DIP Lenders"). The DIP Facility is governed by the DIP Credit Agreement, w

3. The DIP Facility is critical to the Debtors' ability to fund their operations during the pendency of these Chapter 11 cases, maintain going-concern value for the benefit of all stakeholders—including employees, customers, vendors, and creditors—and implement the prepackaged plan of reorganization (the "Plan") contemplated by the Restructuring Support Agreement (the "RSA") described more fully below. Without the DI

4. Crestline Packaging Solutions LLC ("Crestline" or the "Company") is an Ohio-headquartered manufacturer of specialty chemical packaging and industrial containment products, including high-density polyethylene ("HDPE") drums, intermediate bulk containers ("IBCs"), steel pails, and specialty containment vessels. The Company operates four manufacturing plants located in Ohio, Indiana, and Louisiana and employs approxi

5. Absent the DIP Facility, the Debtors will be unable to pay employees, purchase raw materials—including critical HDPE resin supply from Northstar Polymers Inc. and steel from domestic suppliers—maintain operations at their four manufacturing plants, and satisfy administrative obligations arising during these Chapter 11 cases. Such a cessation of operations would result in immediate and irreparable harm to the Debto

6. The terms of the DIP Facility reflect arm's-length negotiations and are reasonable and appropriate under the circumstances. As described more fully below, the pricing of the DIP Facility—including an interest rate of SOFR plus 500 basis points, a commitment fee of 1.50%, and a closing fee of 2.00%—is within the range of market terms for comparable debtor-in-possession financing facilities for companies of similar

7. As set forth more fully herein, the Debtors request that the Court enter the Interim DIP Order approving the DIP Facility on an interim basis, authorizing the Debtors to borrow up to the full $30.0 million commitment immediately and to use cash collateral, and schedule a final hearing (the "Final Hearing") within approximately 25 days of the Petition Date, at which time the Debtors will seek entry of the Final DIP

8. The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the General Order of Reference from the United States District Court for the Northern District of Ohio. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), and the Debtors confirm that they consent to the entry of final orders by this Court to the extent that it is determined that this Court, absent consent of

9. Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409. The Debtors' corporate headquarters are located at 4710 Industrial Corridor Drive, Akron, OH 44308, which is within the Eastern Division of the Northern District of Ohio. Crestline has maintained its principal place of business and the primary location of its manufacturing operations in Akron, Ohio since its formation in 2007.

10. The statutory predicates for the relief requested herein are Sections 105, 361, 362, 363(c)(2), 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), and 364(e) of the Bankruptcy Code and Bankruptcy Rules 2002, 4001(b), 4001(c), and 9014.

III. BACKGROUND A. General Background and Business Description

11. Crestline Packaging Solutions LLC is an Ohio limited liability company formed in 2007, with its principal office and headquarters located at 4710 Industrial Corridor Drive, Akron, OH 44308. The Company is a leading North American manufacturer of specialty chemical packaging and industrial containment products, serving a diversified base of customers in the chemical, petrochemical, and agricultural sectors. Crestl

12. CPS Holdings Inc. ("CPS Holdings") is a Delaware corporation and the direct parent of Crestline, formed in connection with the 2017 leveraged buyout described below. CPS Holdings' registered agent is National Corporate Services, Inc., located at 1209 Orange Street, Wilmington, DE 19801. CPS Holdings has no independent business operations and serves solely as a holding company for Crestline.

13. Crestline operates four manufacturing facilities, each of which is critical to the Company's ongoing operations: (a) Plant 1 (Headquarters): 4710 Industrial Corridor Drive, Akron, OH 44308. Plant 1 is the Company's primary HDPE drum manufacturing facility and serves as Crestline's corporate headquarters. This facility houses approximately 480 employees, including the Company's executive management team, and conta

14. As of the Petition Date, the Debtors employ approximately 1,420 full-time employees across the four facilities described above. Approximately 870 of these employees are hourly production workers, 320 are salaried operations and administrative staff, and 230 are management and professional employees. None of the Debtors' employees are represented by a collective bargaining unit.

15. For the fiscal year ended December 31, 2021 ("FY2021"), Crestline generated revenue of approximately $312.6 million and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $38.4 million. On a trailing twelve-month basis through the first quarter of 2022 ("TTM Q1 2022"), the Company's EBITDA had declined to approximately $29.1 million. Revenue declined approximately 18% from

16. In October 2017, Thornfield Capital Partners LP ("Thornfield"), a Delaware limited partnership with approximately $4.8 billion in assets under management (managing partner Julian Ashford; deal partner Rebecca Strand), acquired 100% of the equity interests in CPS Holdings Inc. for an enterprise value of approximately $410.0 million (the "Acquisition"). The Acquisition was structured as a leveraged buyout, with Tho

17. The Acquisition debt was arranged pursuant to the following instruments: (a) First Lien Credit Agreement: That certain Credit Agreement, dated as of October 13, 2017 (as amended, restated, supplemented, or otherwise modified from time to time, the "First Lien Credit Agreement"), by and among Crestline Packaging Solutions LLC, as borrower, CPS Holdings Inc., as guarantor, Ridgeline National Bank, N.A., as administ

18. The intercreditor relationship between the First Lien Lenders and the holders of the Second Lien Notes is governed by that certain Intercreditor Agreement, dated as of October 13, 2017 (the "Intercreditor Agreement"), among Ridgeline National Bank, N.A., as first lien collateral agent, Continental Fiduciary Trust Company, as second lien collateral representative, and the Debtors. C. Prepetition Capital Structure

19. As of the Petition Date, the Debtors' funded debt capital structure is as follows: ^2 The aggregate principal amount of the Second Lien Notes was reduced from $60.0 million to $56.0 million as a result of $4.0 million in open-market repurchases conducted by the Company in 2019.

20. As of the Petition Date, accrued and unpaid interest on the Second Lien Notes totals approximately $3.9 million, including default rate interest at an additional 2.00% per annum above the stated coupon rate accruing since the date of the Notice of Default on April 22, 2022. Accordingly, total Second Lien claims (inclusive of principal and accrued interest) aggregate approximately $59.9 million.

21. Total First Lien Secured Claims as of the Petition Date aggregate approximately $191.3 million, consisting of $158.7 million of outstanding principal under the First Lien Term Loan and $32.6 million of outstanding principal under the First Lien Revolver, exclusive of accrued interest, fees, and expenses. D. Events Leading to the Chapter 11 Filing

22. The First Lien Credit Agreement contains a Maximum Leverage Ratio financial maintenance covenant set forth in Section 7.11, which requires that the Debtors' Total Net Debt to EBITDA ratio not exceed 5.75x, tested on a quarterly basis. This covenant was designed to ensure that the Company's leverage remained at sustainable levels and was a material term of the First Lien Credit Agreement.

23. As a result of the deterioration in the Company's financial performance described above, the Debtors breached the Maximum Leverage Ratio covenant as of the end of the first quarter of 2022. Specifically, the Company's actual leverage ratio as of Q1 2022 was approximately 8.50x (calculated as $247.3 million in Total Net Debt divided by $29.1 million in TTM EBITDA), which exceeded the covenant maximum of 5.75x by a

24. On April 22, 2022, Ridgeline National Bank, N.A., as administrative agent under the First Lien Credit Agreement, delivered a formal Notice of Default to the Debtors, citing breach of Section 7.11 of the First Lien Credit Agreement. The Notice of Default had the immediate effect of restricting the Debtors' ability to draw upon the unused portion of the First Lien Revolver and triggering the accrual of default rate

25. The Notice of Default under the First Lien Credit Agreement triggered a cross-default under Section 6.01(e) of the Second Lien Indenture, which defines an "Event of Default" to include, among other things, any default under the First Lien Credit Agreement that results in the acceleration or right of acceleration of indebtedness thereunder in an aggregate principal amount exceeding $5.0 million.

26. Following delivery of the Notice of Default, the Debtors engaged in intensive negotiations with the First Lien Lenders in an effort to obtain a forbearance and explore restructuring alternatives. On May 18, 2022, the Debtors, Ridgeline National Bank, N.A. (as administrative agent), and consenting first lien lenders holding approximately 68% of the outstanding principal amount of the First Lien Term Loan executed

27. In connection with the events described above, the Debtors retained Calderwood & Harkness LLP as debtor's counsel and engaged Aldersgate Advisory Group LLC ("Aldersgate") as financial advisor to the Debtors. Aldersgate is led by managing director Priya Narayanan, who has overseen the financial advisory engagement, including the development of the Debtors' business plan, the analysis of restructuring alternatives,

28. Simultaneously, an ad hoc group of holders of the First Lien Term Loan (the "Ad Hoc Group of First Lien Lenders"), represented by Hargrove, Mitchell & Saunders LLP (lead partner Victoria Kline), and an ad hoc group of holders of the Second Lien Notes (the "Ad Hoc Group of Second Lien Noteholders"), represented by Pemberton & Locke LLP (lead partner Raymond Delvecchio), organized to negotiate the terms of a consen

29. Following extensive negotiations among all principal constituencies, on July 8, 2022, the Debtors, CPS Holdings, Thornfield Capital Partners LP, the Ad Hoc Group of First Lien Lenders, and the Ad Hoc Group of Second Lien Noteholders executed the Restructuring Support Agreement (the "RSA"), which contemplates a prepackaged Chapter 11 plan of reorganization. The RSA sets forth the principal economic terms of the Pl

30. Consistent with the milestones set forth in the RSA, the Debtors commenced these Chapter 11 cases on June 20, 2022.

IV. THE DIP FACILITY A. Summary of Material Terms

31. The material terms of the DIP Facility, as set forth in the DIP Credit Agreement (attached hereto as Exhibit C), are summarized below. In the event of any inconsistency between the summary set forth herein and the DIP Credit Agreement, the terms of the DIP Credit Agreement shall control. DIP Agent: Ridgeline National Bank, N.A. (200 Public Square, Cleveland, OH 44114), serving as administrative agent under the DI

32. The DIP Facility will be secured by first-priority priming liens (the "DIP Liens") on substantially all assets of the Debtors, whether now owned or hereafter acquired, real and personal, tangible and intangible, including, without limitation, accounts receivable, inventory, equipment, general intangibles, intellectual property, deposit accounts, investment property, fixtures, real property interests, contract rig

33. Specifically, pursuant to Section 364(d)(1) of the Bankruptcy Code, the DIP Liens shall constitute priming liens that are senior in priority to the existing first lien liens securing the obligations under the First Lien Credit Agreement. The Debtors submit that the requirements of Section 364(d)(1) are satisfied because (a) the Debtors are unable to obtain the DIP Facility without the grant of priming liens, and

34. Pursuant to Section 364(c)(2) of the Bankruptcy Code, the DIP Liens shall also constitute first-priority liens on all assets of the Debtors that are not already encumbered by valid, perfected, and non-avoidable liens as of the Petition Date—that is, on all unencumbered assets of the Debtors.

35. Pursuant to Section 364(c)(3) of the Bankruptcy Code, to the extent there exist any valid, perfected, and non-avoidable liens on assets of the Debtors that are senior to the liens of the prepetition first lien secured parties, the DIP Liens shall constitute junior liens on such assets, subordinate only to such Permitted Prior Liens.

36. The DIP Liens shall not be subject to any lien subordination or marshaling principle and shall be deemed automatically perfected upon entry of the Interim DIP Order without the need for the filing of any financing statements, deeds of trust, mortgages, or other documents of perfection, or the taking of any other action, to perfect such liens, although the DIP Agent shall be authorized (but not required) to file s

37. Pursuant to Section 364(c)(1) of the Bankruptcy Code, all obligations arising under or in connection with the DIP Facility, including principal, interest, fees, expenses, indemnification obligations, and all other amounts owing under the DIP Credit Agreement and the related loan documents (collectively, the "DIP Obligations"), shall constitute allowed superpriority administrative expense claims (the "DIP Superpri

38. Notwithstanding the foregoing, the DIP Liens and the DIP Superpriority Claims shall be subject to a carve-out (the "Carve-Out") for the following: (i) All statutory fees required to be paid to the Office of the United States Trustee pursuant to 28 U.S.C. § 1930(a)(6) and any interest thereon required to be paid pursuant to 31 U.S.C. § 3717; (ii) All fees required to be paid to the Clerk of the Bankruptcy Court; (

39. The specific dollar amounts of the professional fee component of the Carve-Out will be set forth in the DIP Orders and are the subject of ongoing negotiation among the parties. E. Cash Collateral

40. In addition to the authority to obtain postpetition financing under the DIP Facility, the Debtors seek authority to use cash collateral (as defined in Section 363(a) of the Bankruptcy Code) of the prepetition secured parties during the pendency of these Chapter 11 cases. Cash collateral includes, without limitation, cash, deposit accounts, accounts receivable, and proceeds of prepetition collateral, all of which

41. The Debtors require immediate access to cash collateral to fund ongoing operations, including payroll, raw material purchases, and overhead expenses, pending the availability of borrowings under the DIP Facility. Without the ability to use cash collateral, the Debtors would be unable to continue operations even for a brief period.

V. ADEQUATE PROTECTION FOR PREPETITION SECURED PARTIES

42. Pursuant to Sections 361, 362, 363(e), and 364(d)(1) of the Bankruptcy Code, the Debtors propose to provide adequate protection to the prepetition secured parties to protect against any diminution in the value of their interests in prepetition collateral resulting from (a) the Debtors' use of cash collateral, (b) the imposition of the automatic stay under Section 362 of the Bankruptcy Code, and (c) the granting o

43. The Debtors propose the following adequate protection to Ridgeline National Bank, N.A. (in its capacity as administrative agent and collateral agent under the First Lien Credit Agreement) and the prepetition First Lien Lenders (collectively, the "Prepetition First Lien Secured Parties"), against any diminution in the value of their interests in prepetition collateral arising from the Debtors' use of cash collater

44. The Debtors also propose adequate protection to Continental Fiduciary Trust Company (in its capacity as indenture trustee under the Second Lien Indenture) and the holders of the Second Lien Notes (collectively, the "Prepetition Second Lien Secured Parties"), against any diminution in the value of their interests in prepetition collateral. Such adequate protection shall be subordinate and subject in all respects t

45. The Debtors submit that the adequate protection proposed herein is sufficient to protect the interests of both the Prepetition First Lien Secured Parties and the Prepetition Second Lien Secured Parties against any diminution in value of their respective interests in prepetition collateral. The adequate protection is consistent with the priorities and subordination provisions of the Intercreditor Agreement and the

VI. NEED FOR POSTPETITION FINANCING AND USE OF CASH COLLATERAL

46. The Debtors have an immediate and critical need for the liquidity provided by the DIP Facility and the use of cash collateral. The 13-week cash flow projections prepared by the Debtors, with the assistance of Aldersgate Advisory Group LLC, demonstrate that the Debtors will require access to the DIP Facility to fund ongoing operations throughout the pendency of these Chapter 11 cases. Without the DIP Facility, the

47. Specifically, the DIP Facility and cash collateral are necessary to fund the following critical operational and administrative needs: (a) Payroll and Employee Obligations. The Debtors must continue to pay wages and salaries to approximately 1,420 employees across their four manufacturing plants, as well as fund payroll taxes, health insurance, workers' compensation, and other employee-related obligations. Any int

48. Without the DIP Facility, the Debtors' existing cash on hand as of the Petition Date is insufficient to sustain operations through the anticipated timeline of the prepackaged plan. The DIP Budget, attached hereto as Exhibit D, reflects the Debtors' projected cash needs over the 13-week period commencing with the Petition Date and is consistent with the milestone schedule set forth in the RSA. The DIP Budget demon

49. In sum, approval of the DIP Facility and authorization to use cash collateral are essential to the preservation of the Debtors' going-concern value, the continued employment of approximately 1,420 workers, and the successful implementation of the prepackaged plan of reorganization.

VII. THE DEBTORS WERE UNABLE TO OBTAIN UNSECURED CREDIT

50. Sections 364(c) and 364(d) of the Bankruptcy Code authorize a debtor in possession to obtain credit secured by senior or priming liens and with superpriority administrative expense status when the debtor is unable to obtain credit on an unsecured basis allowable under Section 503(b)(1) of the Bankruptcy Code as an administrative expense. See 11 U.S.C. §§ 364(c), 364(d).

51. The Debtors submit that they have satisfied this threshold requirement. Given the Debtors' financial condition—characterized by a leverage ratio of 8.50x (nearly 50% above the maximum covenant level), existing defaults across the entire capital structure (both the First Lien Credit Agreement and the Second Lien Indenture), total funded debt of $247.3 million against trailing twelve-month EBITDA of only $29.1 mill

52. The Debtors, with the assistance of their financial advisor, Aldersgate Advisory Group LLC, explored alternative financing sources and determined that postpetition credit was not available to the Debtors without the grant of (a) superpriority administrative expense status under Section 364(c)(1), (b) first-priority liens on unencumbered assets under Section 364(c)(2), (c) junior liens on encumbered assets under S

53. Aldersgate contacted several potential alternative DIP financing sources and assessed whether any third-party lender would be willing to provide the necessary postpetition liquidity on terms more favorable than those offered by the existing first lien lenders. No such alternative was identified. The DIP Facility, offered by the existing First Lien Lenders through the Ad Hoc Group of First Lien Lenders, represents