Robert and Janet,
I wanted to provide you with a status update on the intercreditor negotiations as we head into next week. As you know, we have been working through the Intercreditor Agreement — first circulated by Renshaw Pratt LLP (David Renshaw, counsel to Whitmore National Bank, N.A. as Senior Administrative Agent) on August 11 — with Archer Blackwell & Moss LLP (Harrison Moss and Angela Whitford, counsel to Ridgeline Mezzanine Capital Fund III, LP as Mezzanine Lender). Our team had a productive three-way call on Friday, September 1, and the parties exchanged revised drafts over the weekend. We have made meaningful progress on most key terms since our August 28 redline and commentary letter to Renshaw Pratt. Below is a summary organized by issue.
**1. Standstill Period — Resolved at 180 Days**
The enforcement standstill period has been agreed at 180 days following delivery of notice by the Mezzanine Lender to the Senior Agent. During this period, Ridgeline may not enforce remedies against shared collateral, and the Senior Collateral Agent (Whitmore) retains sole control of such collateral.
As you will recall, we initially proposed 120 days in our August 28 letter. However, the Senior Agent and its syndicate lenders (Whitmore, Greystone Commercial Lending Corp., Heritage Pacific Bank, and Clearfield Capital Finance, LLC) were firm on 180 days, and Ridgeline ultimately accepted this position as well. Our view is that 180 days is within market range for a senior/mezzanine intercreditor arrangement in a transaction of this size, and we recommend accepting this outcome.
**2. Payment blockage — Agreed Terms**
The payment blockage mechanics have been confirmed. Upon delivery of a Payment blockage Notice by the Senior Agent triggered by a Senior Event of Default, cash interest payments on the mezzanine facility will be blocked for up to 180 consecutive days.
Critically, the parties have agreed that no more than one Payment blockage Notice may be delivered in any 360-day period. This was a key borrower-favorable point that we pressed for in the August 28 redline — it provides Stonefield with certainty and prevents serial blockage scenarios. PIK interest (the 250 bps component) will continue to accrue and compound during any blockage period, which is standard. The 180-day blockage period and 360-day limitation are now reflected in the revised intercreditor draft.
**3. Purchase Option — Confirmed at Par Plus Accrued**
Ridgeline's purchase option has been confirmed on the terms originally proposed: upon acceleration of the senior facility, Ridgeline has the right to purchase the entire outstanding senior debt at par plus accrued interest. The option is exercisable within 30 days of Ridgeline receiving notice of acceleration from the Senior Agent. This was an important structural protection for Ridgeline as mezzanine lender and was not contested by the Senior Agent.
**4. Remaining Open Issue — Scope of Sole Control Provisions**
The principal remaining open issue relates to the scope of the "sole control" provisions — specifically, the extent of the Senior Agent's exclusive right to direct the manner and timing of enforcement against shared collateral during the standstill period.
Renshaw Pratt's current draft gives Whitmore very broad sole control, including the right to release collateral, amend collateral documents, and waive defaults under the senior facility, in each case without mezzanine consent. We are pushing back on behalf of Stonefield — and are aligned with Ridgeline and Archer Blackwell on this point — on two fronts:
- **Collateral Release Limitation.** We are seeking a requirement that the Senior Agent obtain mezzanine consent for any release of "all or substantially all" of the shared collateral during the standstill period. - **Anti-Priming Protection.** We are seeking a limitation providing that the Senior Agent may not amend the senior credit facility in a manner that would materially increase the obligations secured by shared collateral — for example, increasing the senior commitment above $275,000,000 — without mezzanine lender consent.
We expect to resolve this in the next round of drafts. A call with Renshaw and Archer Blackwell is scheduled for Tuesday, September 5.
**5. Senior Agent Consent — Status**
The consent solicitation to the senior syndicate was commenced on August 18, 2023. Gregory Feinberg (Whitmore relationship manager) has indicated that the Senior Agent consent letter is expected to be delivered by Tuesday, September 5. The consent will approve (a) the incurrence of the $120,000,000 mezzanine indebtedness, (b) the grant of second-priority liens on shared collateral, and (c) entry into the Intercreditor Agreement, in each case subject to execution of Amendment No. 3 to the Senior Credit Agreement. The senior agent amendment fee of $137,500 (0.05% of the $275,000,000 senior facility) will be payable upon execution of Amendment No. 3.
**6. Lien Subordination — Confirmed**
The fundamental lien subordination framework is agreed: all mezzanine liens are subordinate and junior to senior liens on shared collateral. Separately, the parent equity pledge — 100% of Stonefield equity pledged by Cascade Ridge SLG Holdings, LLC to Ridgeline — remains a first-priority lien exclusive to the mezzanine lender and is not shared with the senior facility. The Senior Agent has accepted this structure.
**7. Timeline and Next Steps**
Our current target timeline is as follows:
- **September 8** — Resolve all open intercreditor points (sole control provisions) - **September 11** — Distribute final drafts of all transaction documents (Mezzanine Credit Agreement, Intercreditor Agreement, Amendment No. 3, and ancillary security documents) - **September 14** — Signing - **September 29** — Closing and funding
Before our Tuesday call with counterparties, I would like to walk you through the sole control issue and get your views. Could you confirm your availability for a call on Monday, September 4, or alternatively Tuesday morning? Daniel and Lisa are available in the interim if any questions come up before then.
We will circulate the revised intercreditor draft once the sole control provisions are resolved.
Best regards, Stephanie
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**Stephanie Okafor** Partner, Banking & Finance Calderwood & Harkness LLP 601 Lexington Avenue New York, NY 10022 T: (212) 558-4000 E: sokafor@calderwoodharkness.com
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