1020-00002 · Client 1020 · Court Filings/Cash Collateral

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UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF IOWA CEDAR RAPIDS DIVISION

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DEBTOR'S MOTION FOR ENTRY OF AN ORDER AUTHORIZING USE OF CASH COLLATERAL PURSUANT TO 11 U.S.C. §§ 105(a), 361, 362, AND 363

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Greenfield Agricultural Partners LLC ("Greenfield," the "Debtor," or "GAP"), the above-captioned debtor and debtor-in-possession, by and through its undersigned counsel, Calderwood & Harkness LLP, hereby moves this Court (the "Motion") for entry of an order, substantially in the form attached hereto as Exhibit C (the "Proposed Order"), authorizing the Debtor to use cash collateral, as defined in Section 363(a) of Title 11 of the United States Code (the "Bankruptcy Code"), in the ordinary course of its business, in accordance with the 13-week budget attached as Exhibit A hereto (the "Budget"), and granting adequate protection to the pre-petition secured lenders as set forth herein. In support of this Motion, the Debtor respectfully represents as follows:

PRELIMINARY STATEMENT

Greenfield Agricultural Partners LLC is an Iowa limited liability company headquartered at 1400 Prairie Ridge Drive, Cedar Falls, Iowa 50613. On May 15, 2025 (the "Petition Date"), the Debtor filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code in this Court, commencing the above-captioned case. Since the Petition Date, the Debtor has continued to operate its business and manage its properties as a debtor-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or official committee of unsecured creditors has been appointed in this case as of the date of this Motion, although the Debtor anticipates that the Office of the United States Trustee for Region 12 will seek to appoint an Official Committee of Unsecured Creditors in the ordinary course.

The Debtor is a vertically integrated agricultural chemicals manufacturer and distributor. The Debtor owns and operates three manufacturing plants located in Cedar Falls, Iowa; Decatur, Illinois; and Jonesboro, Arkansas. In addition, the Debtor operates fourteen regional distribution centers strategically positioned across the Midwest and Mid-South regions of the United States to serve its customer base of approximately 4,800 agricultural dealers, cooperatives, and large-scale farming operations. The Debtor also owns and maintains a 640-acre research and development farm in Ames, Iowa, which serves as the primary testing site for new product formulations and EPA-regulated field trials. As of the Petition Date, the Debtor employs approximately 2,300 people across its manufacturing, distribution, research, and corporate operations.

This Motion is filed concurrently with the Debtor's Emergency Motion for Entry of Interim and Final Orders Authorizing Debtor-in-Possession Financing (the "DIP Financing Motion"), in which the Debtor seeks authority to enter into a $175,000,000 senior secured superpriority debtor-in-possession credit facility (the "DIP Facility") with a syndicate of lenders led by Ironclad Capital Partners LP. The adequate protection terms proposed herein are fully consistent with, and incorporated into, the adequate protection provisions set forth in the Proposed Interim and Final DIP Orders.

The Debtor's pre-petition secured lenders, acting through Prairie State Bank, N.A. ("Prairie State Bank" or "PSB"), as administrative agent under both the pre-petition First Lien Credit Agreement and the pre-petition ABL Revolving Credit Facility, hold security interests in substantially all of the Debtor's assets. These assets include, without limitation, all cash, cash equivalents, deposit accounts, accounts receivable, inventory, and proceeds thereof, all of which constitute "cash collateral" within the meaning of Section 363(a) of the Bankruptcy Code. The Debtor cannot use this cash collateral without the consent of the secured parties or authorization from this Court, conditioned upon adequate protection of the secured parties' interests.

The Debtor requires immediate authority to use cash collateral in the ordinary course of its business. Without such authority, the Debtor will be unable to fund ongoing operations, make payroll for its approximately 2,300 employees, purchase critical chemical raw materials necessary for manufacturing, fulfill existing customer orders during the peak spring application and summer growing seasons, and maintain the going-concern value of the estate for the benefit of all stakeholders. The consequences of any interruption in the Debtor's ability to access cash collateral would be swift and severe, resulting in the shutdown of manufacturing operations, the loss of key employees and customer relationships, and a dramatic erosion of the value of the Debtor's estate.

Prairie State Bank, N.A., as administrative agent under the pre-petition First Lien Credit Agreement and the pre-petition ABL Revolver, has indicated its conditional consent to the Debtor's use of cash collateral, subject to the adequate protection terms described in detail in Part V of this Motion and entry of Court orders incorporating such terms. A formal Consent Letter from Thomas Whitaker, Senior Vice President, Loan Workout Group, at Prairie State Bank, is expected by May 20, 2025, and will be filed as a supplement to this Motion upon receipt.

The Debtor submits that the adequate protection package proposed herein — consisting of replacement liens, a superpriority administrative expense claim under Section 507(b), current-pay interest at non-default contract rates, and comprehensive monthly reporting obligations — is more than sufficient to protect the pre-petition secured lenders' interests in the cash collateral during the pendency of this case.

I. JURISDICTION AND VENUE

This Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and 1334 and the Standing Order of Reference entered by the United States District Court for the Northern District of Iowa. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), specifically subsections (D) (turnover of property of the estate), (M) (orders approving the use or lease of property, including the use of cash collateral under Section 363 of the Bankruptcy Code), and (O) (other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship). The Debtor confirms that it consents to the entry of final orders by this Court in connection with this Motion to the extent that it is later determined that this Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution.

Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409. The Debtor's principal place of business has been located in Cedar Falls, Iowa, within the Northern District of Iowa, for more than 180 days prior to the Petition Date.

The statutory and legal predicates for the relief sought herein are Sections 105(a), 361, 362, and 363 of the Bankruptcy Code, 11 U.S.C. §§ 105(a), 361, 362, and 363, and Rules 2002, 4001, and 9014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and the Local Rules of the United States Bankruptcy Court for the Northern District of Iowa.

II. BACKGROUND

A. The Debtor's Business Operations

Greenfield Agricultural Partners LLC is an Iowa limited liability company (EIN: 42-8837291) organized under the Iowa Revised Uniform Limited Liability Company Act, Iowa Code Chapter 489. The Debtor is engaged in the manufacture, formulation, distribution, and sale of specialty agricultural chemicals, including herbicides, fungicides, adjuvants, surfactants, and seed treatment products. The Debtor's product portfolio includes more than 120 proprietary and licensed formulations, serving a diverse customer base of agricultural dealers, farmer cooperatives, custom applicators, and large-scale row-crop farming operations across a fourteen-state footprint.

The Debtor's flagship herbicide product, ClearGuard XR, is a broadleaf post-emergent herbicide designed for use in corn and soybean applications. ClearGuard XR has historically accounted for approximately 22% of the Debtor's total revenues and approximately 31% of gross profit. The product is currently subject to a delayed re-registration process by the United States Environmental Protection Agency ("EPA"), which has created significant market uncertainty and contributed to the decline in the Debtor's sales volumes and financial performance during fiscal year 2024. The Debtor's regulatory affairs team, in coordination with its EPA counsel, anticipates that the re-registration decision will be issued by the EPA during the third quarter of 2025.

The Debtor's manufacturing operations are conducted at three plants, each of which is critical to the Debtor's ability to fulfill customer orders and maintain its market position:

(a) Cedar Falls, Iowa — The Debtor's headquarters facility, located at 1400 Prairie Ridge Drive, Cedar Falls, Iowa 50613, serves as the primary manufacturing and formulation plant. This facility has an annual production capacity of approximately 85 million pounds of finished product and houses the Debtor's corporate offices, quality assurance laboratories, and primary distribution hub. The Cedar Falls plant recently underwent a $4,200,000 compressor overhaul, of which approximately $1,600,000 remains unpaid to Norris Industrial Services LLC as of the Petition Date.

(b) Decatur, Illinois — The Debtor's secondary manufacturing plant, located at 2200 Industrial Boulevard, Decatur, Illinois 62521, specializes in the production of fungicide and seed treatment formulations. This facility has an annual production capacity of approximately 52 million pounds and employs approximately 480 workers.

(c) Jonesboro, Arkansas — The Debtor's southern manufacturing facility, located at 815 County Road 740, Jonesboro, Arkansas 72401, focuses on adjuvant and surfactant production for the Mid-South cotton and rice markets. This facility has an annual production capacity of approximately 38 million pounds and employs approximately 310 workers.

In addition to its manufacturing operations, the Debtor operates fourteen regional distribution centers across the Midwest and Mid-South, strategically located to provide next-day delivery capability to the majority of its customer base. These distribution centers are critical to the Debtor's competitive position and customer service capabilities, particularly during the compressed spring application season when timely product delivery is essential.

The Debtor also owns and operates a 640-acre research and development farm located at 4500 University Boulevard, Ames, Iowa 50010. This facility serves as the Debtor's primary site for field trials, product efficacy testing, and regulatory studies required for EPA product registrations and re-registrations. The R&D farm is staffed by approximately 45 scientists, agronomists, and field technicians and represents a significant asset of the estate.

The Debtor's business is highly seasonal in nature. The agricultural chemicals industry in the Midwest and Mid-South regions experiences peak demand during the second and third calendar quarters of each year, corresponding to the spring planting and application season (approximately March through June) and the summer growing season (approximately June through August). During these peak periods, the Debtor typically generates approximately 65% to 70% of its annual revenues. The Budget period — May 15, 2025 through August 13, 2025 — captures the tail end of the spring application season and the entirety of the summer growing season, making uninterrupted operations during this period absolutely critical to the preservation of the Debtor's going-concern value and the maximization of recoveries for all stakeholders.

As of the Petition Date, the Debtor employs approximately 2,300 people across its manufacturing plants, distribution centers, R&D farm, and corporate offices. The Debtor's workforce includes skilled chemical engineers, plant operators, logistics professionals, sales representatives, agronomists, and administrative and support staff. The retention of this workforce is essential to the Debtor's ability to operate its business during the Chapter 11 case and to effectuate a successful restructuring.

B. Pre-Petition Capital Structure

The Debtor's pre-petition capital structure consists of the following funded debt obligations and unsecured claims:

1. First Lien Term Loan

The Debtor is the borrower under a First Lien Term Loan Credit Agreement dated as of November 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "First Lien Credit Agreement"), by and among the Debtor, as borrower, Prairie State Bank, N.A., as administrative agent and collateral agent (in such capacity, the "First Lien Agent"), and the lenders party thereto from time to time (the "First Lien Lenders"). As of the Petition Date, the aggregate outstanding principal balance under the First Lien Credit Agreement was $310,000,000. The First Lien Term Loan bears interest at a floating rate equal to the Secured Overnight Financing Rate ("SOFR") plus 450 basis points per annum. The stated maturity date of the First Lien Term Loan is November 15, 2026. The obligations under the First Lien Credit Agreement are secured by a first-priority lien on substantially all assets of the Debtor, including, without limitation, all deposit accounts, general intangibles, equipment, real property (including the Cedar Falls, Decatur, and Jonesboro manufacturing plants and the Ames R&D farm), intellectual property, and all proceeds thereof.

2. ABL Revolving Credit Facility

The Debtor is the borrower under an Asset-Based Revolving Credit Agreement dated as of March 1, 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the "ABL Credit Agreement" and, together with the First Lien Credit Agreement, the "Pre-Petition Credit Agreements"), by and among the Debtor, as borrower, Prairie State Bank, N.A., as administrative agent and collateral agent (in such capacity, the "ABL Agent" and, together with the First Lien Agent, the "Pre-Petition Agent"), and the lenders party thereto from time to time (the "ABL Lenders"), including Hawthorn National Bank and Northland Savings Bank, F.S.B., as participating lenders. The ABL Credit Agreement provides for a revolving credit facility with a total commitment of $95,000,000 (the "ABL Revolver"). As of the Petition Date, the aggregate outstanding principal balance drawn under the ABL Revolver was $72,300,000. The ABL Revolver bears interest at a floating rate equal to SOFR plus 275 basis points per annum. The stated maturity date of the ABL Revolver is May 1, 2026. The obligations under the ABL Credit Agreement are secured by a first-priority lien on the Debtor's accounts receivable and inventory, pursuant to a split-collateral intercreditor arrangement with the First Lien Lenders (the "Intercreditor Agreement"). Under the Intercreditor Agreement, the ABL Lenders hold a first-priority lien on receivables and inventory, and the First Lien Lenders hold a first-priority lien on all other collateral, with each group holding a second-priority lien on the other group's primary collateral.

3. Senior Unsecured Notes

The Debtor is the issuer of 9.50% Senior Unsecured Notes due March 15, 2027 (the "Senior Unsecured Notes"), issued pursuant to an Indenture dated as of March 15, 2022 (the "Indenture"), by and between the Debtor, as issuer, and Meridian Trust Company, as indenture trustee (the "Indenture Trustee"). As of the Petition Date, the aggregate outstanding principal balance of the Senior Unsecured Notes was $84,200,000. The Senior Unsecured Notes bear interest at a fixed rate of 9.50% per annum, payable semi-annually on March 15 and September 15 of each year. The Senior Unsecured Notes are unsecured obligations of the Debtor and do not benefit from any lien on the Debtor's assets.

4. Trade and Other Unsecured Claims

As of the Petition Date, the Debtor estimates that it owes approximately $22,700,000 in trade payables and other general unsecured claims to vendors, suppliers, service providers, and other creditors. The Debtor's top five chemical raw material suppliers are owed an aggregate of approximately $9,400,000 as of the Petition Date. These suppliers are critical to the Debtor's ability to continue manufacturing operations, and the Debtor has concurrently filed a Motion for Authority to Pay Critical Vendors (up to $12,000,000) in connection with these and other essential vendor relationships.

5. Summary of Pre-Petition Capital Structure

Total pre-petition secured debt: $382,300,000 ($310,000,000 + $72,300,000). Total unsecured claims pool: $106,900,000 ($84,200,000 Senior Unsecured Notes + $22,700,000 trade and other unsecured claims).

C. Events Leading to the Chapter 11 Filing

The Debtor's decision to seek relief under Chapter 11 of the Bankruptcy Code was precipitated by a confluence of operational, regulatory, and financial challenges that, taken together, rendered the Debtor unable to service its funded debt obligations and comply with the financial covenants in its Pre-Petition Credit Agreements.

Leverage Covenant Breach. As of December 31, 2024, the Debtor breached the Total Net Leverage Ratio covenant contained in Section 7.11(a) of the First Lien Credit Agreement. The First Lien Credit Agreement requires the Debtor to maintain a Total Net Leverage Ratio (defined as Consolidated Net Debt divided by Consolidated Adjusted EBITDA for the most recently ended four fiscal quarters) of no greater than 6.50 to 1.00. As of December 31, 2024, the Debtor's actual Total Net Leverage Ratio was approximately 9.82 to 1.00, calculated as follows: Consolidated Net Debt of $370,500,000 ($310,000,000 First Lien Term Loan + $72,300,000 drawn ABL Revolver − $11,800,000 unrestricted cash) divided by Consolidated Adjusted EBITDA for the twelve months ended December 31, 2024, of $37,700,000. This breach constituted an Event of Default under the First Lien Credit Agreement and a cross-default under the ABL Credit Agreement.

Forbearance Agreement. Following the leverage covenant breach, the Debtor entered into a Forbearance Agreement with Prairie State Bank, N.A., as administrative agent, dated January 31, 2025 (the "Forbearance Agreement"), pursuant to which the Pre-Petition Agent and the Required Lenders agreed to forbear from exercising remedies with respect to the covenant breach for a period expiring on May 1, 2025. The Forbearance Agreement was conditioned upon, among other things, the Debtor's retention of a financial advisor, the commencement of a comprehensive review of the Debtor's strategic and financial alternatives, and compliance with certain reporting obligations. The Forbearance Agreement expired on May 1, 2025, without extension, leaving the Pre-Petition Agent and the Pre-Petition Lenders free to exercise any and all remedies available under the Pre-Petition Credit Agreements and applicable law.

Missed Interest Payment on Senior Unsecured Notes. The Debtor failed to make the semi-annual interest payment due on March 15, 2025, on the Senior Unsecured Notes. The total interest payment due was $3,999,500 ($84,200,000 × 9.50% ÷ 2). Of this amount, the Debtor made a partial payment of $318,250, leaving $3,681,250 unpaid. The Indenture provides for a 30-day grace period for missed interest payments, which expired on April 14, 2025, at which point the failure to pay constituted an Event of Default under the Indenture. The Indenture Trustee, Meridian Trust Company, delivered a notice of default to the Debtor on April 17, 2025.

Operational Causes. The Debtor's financial deterioration was driven by several operational factors, including: (i) severe drought conditions during the 2024 growing season across the Debtor's primary market areas, which depressed demand for the Debtor's herbicide and fungicide products as farmers reduced crop input spending; (ii) depressed commodity pricing for corn, soybeans, and cotton, which further constrained farmer purchasing power and reduced the Debtor's sales volumes; and (iii) the delayed EPA re-registration of ClearGuard XR, the Debtor's flagship herbicide product, which created significant market uncertainty and led certain customers and dealers to defer purchases pending regulatory clarity.

Fiscal Year 2024 Financial Performance. For the fiscal year ended December 31, 2024, the Debtor reported total revenues of $612,400,000 (a decline of approximately 14% from the prior year) and Adjusted EBITDA of $38,700,000 (a decline of approximately 41% from the prior year). As of the Petition Date, the Debtor had unrestricted cash on hand of approximately $11,800,000. Based on the preliminary analysis of the Debtor's financial advisor, Claridge Advisory Group LLC, the Debtor's estimated enterprise value falls within a range of $280,000,000 to $340,000,000, with a mid-point of approximately $310,000,000.

D. The Chapter 11 Case

The Debtor filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code on May 15, 2025, in the United States Bankruptcy Court for the Northern District of Iowa, Cedar Rapids Division. The case has been assigned Case No. 25-01147 and has been assigned to the Honorable Margaret R. Dunleavy. This is a single-entity filing; the Debtor has no subsidiary entities that are debtors in this or any other bankruptcy case at this time.

The Debtor's professional advisors retained or to be retained in this case include the following:

(a) Debtor's Counsel: Calderwood & Harkness LLP, with Nathaniel Bower serving as the responsible partner, Colette Whitman as billing partner, Gabrielle Moss as lead associate, and Amy Chesterton as working associate. Calderwood & Harkness LLP maintains its principal office at 450 Park Avenue, New York, New York 10022, and its Iowa office at 801 Grand Avenue, Suite 3300, Des Moines, Iowa 50309.

(b) Debtor's Financial Advisor: Claridge Advisory Group LLC, with Nolan Ashworth, Managing Director, serving as the lead engagement professional.

(c) Debtor's Auditors and Tax Advisors: Holloway & Birch LLP, with Andrew Sorensen, Audit Partner, serving as the lead engagement partner.

(d) Appraiser: Bellwether Valuation Services Inc., with Gregory Pineda, Senior Managing Director, leading the engagement.

(e) Registered Agent: Capitol Registered Agents Inc., 400 E. Court Avenue, Suite 200, Des Moines, Iowa 50309.

III. IDENTIFICATION OF CASH COLLATERAL

A. Definition of Cash Collateral

Section 363(a) of the Bankruptcy Code defines "cash collateral" as:

cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents whenever acquired in which the estate and an entity other than the estate have an interest and includes the proceeds, products, offspring, rents, or profits of property and the fees, charges, accounts, or other payments for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties subject to a security interest as provided in section 552(b) of this title, whether existing before or after the commencement of a case under this title.

11 U.S.C. § 363(a). The Debtor's cash on hand (approximately $11,800,000 as of the Petition Date), accounts receivable, inventory and inventory proceeds, and deposit account balances held at banking institutions constitute cash collateral in which Prairie State Bank, N.A., as administrative agent for the pre-petition First Lien Lenders and the ABL Revolver Lenders, holds a security interest pursuant to the Pre-Petition Credit Agreements. Additionally, to the extent that any post-petition proceeds of pre-petition collateral constitute cash or cash equivalents, such proceeds also constitute cash collateral subject to the liens of the pre-petition secured lenders pursuant to Section 552(b) of the Bankruptcy Code.

B. Pre-Petition Liens on Cash Collateral

The cash collateral that is the subject of this Motion is encumbered by the following pre-petition security interests:

First Lien Term Loan Collateral. Pursuant to the First Lien Credit Agreement and the related Security Agreement, Pledge Agreement, intellectual Property Security Agreement, and Mortgage Documents, the First Lien Lenders hold a first-priority security interest in substantially all assets of the Debtor, including, without limitation, all deposit accounts, cash and cash equivalents, general intangibles, equipment, fixtures, real property (including the manufacturing plants in Cedar Falls, Iowa; Decatur, Illinois; and Jonesboro, Arkansas, and the R&D farm in Ames, Iowa), intellectual property (including all patents, trademarks, trade names, and EPA product registrations), and all proceeds, products, and profits thereof. Under the Intercreditor Agreement, the First Lien Lenders hold a second-priority lien on accounts receivable and inventory (which are the primary collateral of the ABL Lenders).

ABL Revolver Collateral. Pursuant to the ABL Credit Agreement and the related Security Agreement, the ABL Lenders hold a first-priority security interest in the Debtor's accounts receivable and inventory, including all proceeds thereof, under a split-collateral intercreditor arrangement governed by the Intercreditor Agreement. Under the Intercreditor Agreement, the ABL Lenders hold a second-priority lien on all other collateral of the Debtor (which is the primary collateral of the First Lien Lenders).

Prairie State Bank, N.A., serves as administrative agent and collateral agent under both the First Lien Credit Agreement and the ABL Credit Agreement, and accordingly holds the primary security interests in the cash collateral on behalf of the pre-petition secured lender groups.

Unsecured Creditors. The Senior Unsecured Notes ($84,200,000 outstanding, with Meridian Trust Company serving as indenture trustee) and the Debtor's trade creditors and other general unsecured creditors (approximately $22,700,000 in the aggregate) are unsecured obligations. These creditors do not hold any security interest, lien, or other encumbrance on the Debtor's cash collateral or any other assets.

C. Estimation of Cash Collateral Usage

The Debtor's projected use of cash collateral during the initial 13-week budget period (May 15, 2025 through August 13, 2025) has been prepared by the Debtor in coordination with its financial advisor, Claridge Advisory Group LLC, and is summarized as follows:

In addition to operating disbursements, the Debtor projects the following additional cash outlays during the 13-week budget period:

(a) Restructuring professional fees (including fees and expenses of the Debtor's counsel, financial advisor, auditors, and other retained professionals, as well as estimated fees and expenses of any official committee professionals): $16,100,000;

(b) Debt service and adequate protection payments to the pre-petition secured lenders: $11,050,000; and

(c) Capital expenditures (including critical maintenance and safety-related expenditures at the three manufacturing plants): $3,600,000.

Total projected net cash outflow over the 13-week budget period is $35,050,000. The detailed 13-week budget is attached hereto as Exhibit A (cross-referenced to Exhibit A of the Proposed Interim DIP Order filed in connection with the DIP Financing Motion).

The Debtor's use of cash collateral during this period is essential to fund payroll for approximately 2,300 employees, to purchase chemical raw materials from critical suppliers necessary for manufacturing operations, to maintain continuous operations at all three manufacturing plants during peak selling season, to service existing customer orders and maintain customer relationships, and to preserve the going-concern value of the estate. Any disruption in the Debtor's access to cash collateral would result in the immediate cessation of manufacturing operations, the loss of key employees and customer relationships, and an irreparable destruction of estate value.

IV. RELIEF REQUESTED

By this Motion, the Debtor respectfully requests that this Court enter an order, pursuant to Sections 105(a), 361, 362, and 363 of the Bankruptcy Code:

(a) Authorizing the Debtor to use Cash Collateral (as defined herein) in the ordinary course of its business operations, in accordance with the 13-week DIP budget attached hereto as Exhibit A (the "Budget"), as such Budget may be modified from time to time with the consent of the DIP Lenders and the Pre-Petition Agent;

(b) Granting adequate protection to Prairie State Bank, N.A., as pre-petition administrative agent and collateral agent, and the pre-petition First Lien Lenders and ABL Revolver Lenders (collectively, the "Pre-Petition Secured Lenders"), for any diminution in the value of their interests in the Cash Collateral and other pre-petition collateral resulting from the Debtor's use, sale, or lease thereof and/or the imposition of the automatic stay pursuant to Section 362(a) of the Bankruptcy Code, in the form of (i) replacement liens on substantially all post-petition assets and proceeds, (ii) a superpriority administrative expense claim under Section 507(b) of the Bankruptcy Code, (iii) current-pay interest at non-default contract rates, and (iv) monthly financial and collateral reporting;

(c) Scheduling a final hearing on this Motion, to be heard in conjunction with the final hearing on the DIP Financing Motion, on or before June 19, 2025; and

(d) Granting such other and further relief as this Court deems just and proper.

V. ADEQUATE PROTECTION FOR PRE-PETITION SECURED LENDERS

A. Legal Standard — Section 361

Section 363(c)(2) of the Bankruptcy Code provides that a debtor-in-possession may not use, sell, or lease cash collateral unless (A) each entity that has an interest in such cash collateral consents, or (B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of Section 363 of the Bankruptcy Code. 11 U.S.C. § 363(c)(2).

Section 363(e) of the Bankruptcy Code further provides that, upon request of an entity that has an interest in property used, sold, or leased by a debtor-in-possession, the court shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest. 11 U.S.C. § 363(e). The burden of proof on the issue of adequate protection rests with the debtor-in-possession. 11 U.S.C. § 363(p)(1).

Section 361 of the Bankruptcy Code sets forth the forms of adequate protection that may be provided to a secured party whose interest in property may be diminished by the debtor's use of such property. These forms include:

(1) Requiring the debtor-in-possession to make periodic cash payments to the secured party to the extent that the stay, use, sale, or lease results in a decrease in the value of the secured party's interest in the property. 11 U.S.C. § 361(1);

(2) Providing the secured party with an additional or replacement lien to the extent that the stay, use, sale, or lease results in a decrease in the value of the secured party's interest in the property. 11 U.S.C. § 361(2); and

(3) Granting such other relief, other than an administrative expense claim, as will result in the realization by the secured party of the "indubitable equivalent" of the secured party's interest in the property. 11 U.S.C. § 361(3).

The concept of adequate protection is flexible and is to be determined on a case-by-case basis. See In re Cont'l Airlines, 91 F.3d 553, 556 (3d Cir. 1996); In re Swedeland Dev. Grp., Inc., 16 F.3d 552, 564 (3d Cir. 1994). The adequate protection requirement is designed to insure that the secured creditor receives the value of its bargained-for position during the pendency of the bankruptcy case. See United Sav. Ass'n of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 370 (1988).

B. Proposed Adequate Protection Package

The Debtor proposes the following adequate protection package for the benefit of the Pre-Petition Secured Lenders, consistent with the terms of the Adequate Protection Stipulation negotiated between the Debtor and Prairie State Bank, N.A. (through Thomas Whitaker, Senior Vice President, Loan Workout Group, and Angela Reeves, Vice President, Loan Administration):

1. Replacement Liens. Prairie State Bank, N.A., as administrative agent and collateral agent for the Pre-Petition Secured Lenders (including the pre-petition First Lien Lenders and the ABL Revolver Lenders, the latter including participating banks Hawthorn National Bank and Northland Savings Bank, F.S.B.), shall receive valid, binding, enforceable, non-avoidable, and automatically perfected replacement liens (the "Replacement Liens") on all post-petition assets of the Debtor and all proceeds, products, rents, and profits thereof, to the same extent and with the same validity, priority, and enforceability as the pre-petition liens held by the Pre-Petition Secured Lenders, but subject to and junior only to:

(i) the liens and superpriority claims granted to the DIP Lenders under the DIP Credit Agreement and the Interim and Final DIP Orders (collectively, the "DIP Liens"); and

(ii) the Carve-Out (as defined in the DIP Credit Agreement), consisting of (A) all accrued and unpaid professional fees and disbursements incurred by the Debtor's estate professionals and any official committee professionals at any time prior to the delivery of a Carve-Out Trigger Notice (as defined in the DIP Credit Agreement); (B) a post-trigger reserve of $2,500,000 for professional fees and disbursements of estate professionals and official committee professionals incurred after delivery of a Carve-Out Trigger Notice; and (C) a post-trigger reserve of $500,000 for fees payable to the United States Trustee pursuant to 28 U.S.C. § 1930 and the Clerk of this Court, for a total aggregate post-trigger Carve-Out of $3,000,000.

The Replacement Liens shall have the same relative priority, validity, and enforceability as the Pre-Petition Secured Lenders' pre-petition liens, including the relative priorities established by the Intercreditor Agreement as between the First Lien Lenders and the ABL Lenders. The Replacement Liens shall be deemed perfected without the necessity of the filing of any financing statements, mortgages, or other documents, or the taking of any other action that would otherwise be required under applicable non-bankruptcy law to perfect a security interest or lien.

2. Superpriority Administrative Expense Claim. To the extent that the adequate protection provided to the Pre-Petition Secured Lenders (including the Replacement Liens, current-pay interest, and reporting obligations) proves insufficient to protect the Pre-Petition Secured Lenders against the diminution in value of their interests in the pre-petition collateral and cash collateral, Prairie State Bank, N.A., on behalf of the Pre-Petition Secured Lenders, shall be granted a superpriority administrative expense claim (the "Adequate Protection Superpriority Claim") against the Debtor's estate pursuant to Section 507(b) of the Bankruptcy Code, which claim shall have priority over all administrative expense claims and unsecured claims against the Debtor and its estate under Sections 503(b) and 507(b) of the Bankruptcy Code, and any and all other provisions of the Bankruptcy Code; provided, however, that the Adequate Protection Superpriority Claim shall be junior in priority to the superpriority administrative expense claim granted to the DIP Lenders under Section 364(c)(1) of the Bankruptcy Code pursuant to the Interim and Final DIP Orders.

3. Current-Pay Interest. The Debtor shall make current-pay interest payments to the Pre-Petition Secured Lenders at the non-default contract rates, as follows:

(i) On the First Lien Term Loan ($310,000,000 outstanding): interest at the rate of SOFR plus 450 basis points per annum, payable monthly in arrears; and

(ii) On the ABL Revolver ($72,300,000 outstanding): interest at the rate of SOFR plus 275 basis points per annum, payable monthly in arrears.

The foregoing current-pay interest payments constitute adequate protection payments and are reflected in the Budget as debt service and adequate protection line items, allocated as follows:

The Debtor submits that payment of current-pay interest at the non-default contract rates is appropriate under the circumstances and constitutes adequate protection within the meaning of Section 361(1) of the Bankruptcy Code. The Debtor notes that the non-default contract rate, rather than the default rate, is the appropriate benchmark for adequate protection payments during a Chapter 11 case. See, e.g., In re Residential Capital, LLC, 501 B.R. 549, 613–14 (Bankr. S.D.N.Y. 2013); In re Taddeo, 685 F.2d 24, 28 (2d Cir. 1982).

4. Monthly Reporting. The Debtor shall provide Prairie State Bank, N.A., as Pre-Petition Agent, with a comprehensive monthly reporting package (the "Monthly Report"), to be delivered within twenty (20) calendar days following the end of each calendar month, consisting of:

(i) A rolling 13-week cash flow forecast, updated to reflect actual results for the most recently completed period and revised projections for the remaining forecast period;

(ii) Budget-to-actual variance reports, showing the actual receipts and disbursements for each completed week as compared to the corresponding line items in the Budget, tested on a rolling four-week basis;

(iii) Collateral status reports, including (A) accounts receivable aging reports (detailing current, 30-day, 60-day, 90-day, and 90+-day aging buckets), (B) inventory reports (detailing raw materials, work-in-process, and finished goods by location and product category), and (C) collateral appraisal updates from Bellwether Valuation Services Inc. (Gregory Pineda, Senior Managing Director), to the extent available; and

(iv) Monthly financial statements, including a balance sheet, income statement, and statement of cash flows, prepared by the Debtor with the assistance of its auditors and tax advisors, Holloway & Birch LLP (Andrew Sorensen, Audit Partner).

The reporting obligations described above are in addition to any reporting requirements imposed by the DIP Credit Agreement, the Interim and Final DIP Orders, or orders of this Court.

C. Prairie State Bank Consent

Prairie State Bank, N.A., as Pre-Petition Agent, has indicated its conditional consent to the Debtor's use of cash collateral in the ordinary course of business, subject to the adequate protection terms described in this Part V and the entry of Court orders incorporating such terms. The Debtor's counsel and financial advisor have been in continuous discussions with Thomas Whitaker, Senior Vice President, Loan Workout Group, and Angela Reeves, Vice President, Loan Administration, at Prairie State Bank, N.A., regarding the terms of the adequate protection package, and the parties have reached agreement in principle on the terms described herein.

A formal Consent Letter executed by Thomas Whitaker on behalf of Prairie State Bank, N.A., as Pre-Petition Agent, is expected to be delivered by May 20, 2025. Upon receipt, the Debtor will promptly file the Consent Letter as a supplement to this Motion and will make it available to all parties in interest.

In addition, the ABL Revolver Lenders — Prairie State Bank, N.A., Hawthorn National Bank, and Northland Savings Bank, F.S.B. — have indicated their support for the Debtor's use of cash collateral and the adequate protection terms described herein, contingent upon the consummation of the roll-up of $20,000,000 of pre-petition ABL obligations into the DIP Facility, as set forth in the DIP Credit Agreement filed in connection with the DIP Financing Motion. The ABL roll-up is designed to reduce the outstanding pre-petition ABL balance from $72,300,000 to $52,300,000, providing additional collateral cushion to the remaining pre-petition ABL Lenders and aligning the interests of the pre-petition and post-petition lending groups.

D. Equity Cushion and Collateral Coverage

The Debtor's total pre-petition secured debt is approximately $382,300,000, consisting of $310,000,000 under the First Lien Term Loan and $72,300,000 drawn under the ABL Revolver.

The Debtor's estimated enterprise value, based on the preliminary analysis of Claridge Advisory Group LLC and supported by the ongoing appraisal work of Bellwether Valuation Services Inc. (Gregory Pineda, Senior Managing Director), falls within a range of $280,000,000 to $340,000,000, with a mid-point of approximately $310,000,000. While the mid-point of the estimated enterprise value range is less than the total pre-petition secured debt, the Debtor submits that the following factors provide the Court with a sufficient basis to find that the proposed adequate protection package adequately protects the Pre-Petition Secured Lenders' interests:

(a) The Debtor's liquid assets and ongoing revenue generation during the peak selling season — with projected operating receipts of $129,600,000 over the 13-week budget period — provide substantial cash flow to support adequate protection payments and the preservation of collateral value;

(b) The Replacement Liens extend to all post-petition assets and proceeds, providing the Pre-Petition Secured Lenders with security interests in newly generated receivables, inventory, and other assets that will be created during the post-petition period;

(c) The current-pay interest payments of $11,050,000 over the 13-week period compensate the Pre-Petition Secured Lenders for the time value of their collateral;

(d) The comprehensive reporting obligations provide the Pre-Petition Secured Lenders with real-time visibility into the status and value of their collateral;

(e) The Section 507(b) Adequate Protection Superpriority Claim provides an additional layer of protection in the event that the other adequate protection measures prove insufficient; and

(f) The formal collateral appraisals being prepared by Bellwether Valuation Services Inc. will provide more precise valuations of the Debtor's real property, equipment, intellectual property, and other assets, and will be made available to the Pre-Petition Agent and the Court upon completion.

The Debtor respectfully submits that the totality of the proposed adequate protection package is more than sufficient to protect the Pre-Petition Secured Lenders' interests in the cash collateral and other pre-petition collateral, and that the Court should authorize the Debtor's use of cash collateral on the terms described herein.

VI. THE DEBTOR'S NEED TO USE CASH COLLATERAL IS URGENT

The Debtor's need to use cash collateral is immediate and urgent, and any delay in granting the relief requested herein would result in irreparable harm to the Debtor's estate and all of its stakeholders.

Insufficient Cash Reserves. As of the Petition Date, the Debtor had unrestricted cash on hand of only $11,800,000. Based on the Debtor's projected weekly operating disbursements (averaging approximately $10,300,000 per week during the first four weeks of the budget period), the Debtor's existing cash reserves are insufficient to fund more than approximately eight to ten business days of operating disbursements without access to cash collateral and DIP financing. Without immediate access to cash collateral, the Debtor will exhaust its available cash within the first two weeks following the Petition Date, forcing the cessation of all manufacturing and distribution operations.

Seasonal Business Critical Period. The Debtor's business is highly seasonal, with peak sales occurring during the second and third calendar quarters of each year. The Budget period — May 15, 2025 through August 13, 2025 — captures the tail end of the spring application season and the entirety of the summer growing season, which together represent the most critical period of the Debtor's annual operating cycle. Any interruption in the Debtor's operations during this period would cause irreparable harm to the estate and its stakeholders. Customers who are unable to obtain products from the Debtor during the spring and summer seasons will turn to competitors, and the resulting loss of customer relationships and market share may be permanent and unrecoverable.

Continuous Manufacturing Operations. The Debtor's three manufacturing plants in Cedar Falls, Iowa; Decatur, Illinois; and Jonesboro, Arkansas require continuous operation to meet customer demand during the peak selling season. These plants operate on multi-shift schedules and produce specialty chemical formulations that require precise process control and quality assurance. The Cedar Falls plant, the Debtor's largest and most critical manufacturing facility, recently underwent a $4,200,000 compressor overhaul, of which approximately $1,600,000 remains unpaid to Norris Industrial Services LLC. Completion of the compressor overhaul is essential to maintaining production capacity at the Cedar Falls facility, and the Debtor's ability to satisfy this critical vendor obligation depends upon its access to cash collateral.

Critical Supplier Relationships. The Debtor's top five chemical raw material suppliers are owed an aggregate of approximately $9,400,000 in pre-petition trade payables as of the Petition Date. These suppliers provide essential chemical feedstocks, active ingredients, and formulation components without which the Debtor cannot manufacture its products. Many of these suppliers operate on a just-in-time delivery basis, and any disruption in the supply chain would result in production shutdowns at one or more of the Debtor's manufacturing plants within days. The Debtor has concurrently filed a Motion for Authority to Pay Critical Vendors (up to $12,000,000) to address these essential supplier relationships, and the success of that motion depends upon the Debtor's ability to use cash collateral to fund ongoing purchases from these suppliers in the post-petition period.

Employee Payroll and Benefits. The Debtor employs approximately 2,300 people across its manufacturing, distribution, research, and corporate operations. The Debtor's next payroll cycle occurs on or about May 23, 2025, with an estimated gross payroll (including wages, salaries, payroll taxes, and employee benefits) of approximately $4,800,000. Without authority to use cash collateral, the Debtor will be unable to make payroll, resulting in the immediate loss of critical employees and the likely cessation of all business operations. The loss of skilled manufacturing employees, in particular, would be devastating to the estate, as these workers possess specialized knowledge and certifications that cannot be easily or quickly replaced.

Preservation of Going-Concern Value. The Debtor's going-concern value — estimated at a mid-point of approximately $310,000,000 — is inextricably linked to the Debtor's ability to continue operating its business without interruption. Any cessation of operations would immediately and dramatically reduce the value of the Debtor's assets, converting a going-concern enterprise into a collection of idle plants, depreciating equipment, and aging chemical inventory. The difference between a going-concern value of $310,000,000 and a forced liquidation value (estimated by Claridge Advisory Group LLC at approximately $120,000,000 to $150,000,000) represents a potential loss of $160,000,000 to $190,000,000 in value — a loss that would be borne by all of the Debtor's creditors and stakeholders.

For all of the foregoing reasons, the Debtor respectfully submits that its need to use cash collateral is urgent and that the Court should authorize such use on an expedited basis.

VII. APPLICABLE LEGAL STANDARDS

A. Section 363(c)(2) — Consent or Court Authorization

Section 363(c)(2) of the Bankruptcy Code provides that a debtor-in-possession may not use, sell, or lease cash collateral unless:

(A) each entity that has an interest in such cash collateral consents; or

(B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of this section.

11 U.S.C. § 363(c)(2). Section 363(c)(3) further provides that any hearing under paragraph (2)(B) of this subsection may be a preliminary hearing or may be consolidated with a hearing under subsection (e) of this section, but the court shall act promptly on any request for authorization under paragraph (2)(B). 11 U.S.C. § 363(c)(3). If the court authorizes the use of cash collateral on an interim or preliminary basis, it may condition such authorization on the provision of adequate protection and such other terms as the court deems appropriate.

Here, Prairie State Bank, N.A., as Pre-Petition Agent, has indicated its conditional consent to the Debtor's use of cash collateral, subject to the adequate protection terms described herein. In addition, the Debtor seeks Court authorization as an independent and alternative basis for the use of cash collateral, to ensure that the Debtor has full authority to access its cash collateral even in the event that any question arises regarding the scope or effectiveness of the Pre-Petition Agent's consent.

B. Section 361 — Forms of Adequate Protection

Section 361 of the Bankruptcy Code provides three non-exclusive statutory forms of adequate protection:

(1) Periodic cash payments. The debtor may be required to make periodic cash payments to the secured party to the extent that the stay, use, sale, or lease results in a decrease in the value of the secured party's interest in the property. 11 U.S.C. § 361(1). This form of adequate protection is designed to compensate the secured creditor for the ongoing diminution in the value of its collateral.

(2) Additional or replacement liens. The debtor may provide the secured party with an additional or replacement lien to the extent that the stay, use, sale, or lease results in a decrease in the value of the secured party's interest in the property. 11 U.S.C. § 361(2). Replacement liens on post-petition assets provide the secured creditor with security interests in newly generated collateral to offset the diminution in value of the pre-petition collateral.

(3) Indubitable equivalent. The debtor may grant such other relief as will result in the realization by the secured party of the "indubitable equivalent" of the secured party's interest in the property. 11 U.S.C. § 361(3). The statute expressly provides, however, that adequate protection may not be provided solely through the grant of an administrative expense claim under Section 503(b)(1) of the Bankruptcy Code.

The adequate protection package proposed herein incorporates multiple forms of adequate protection: replacement liens on all post-petition assets and proceeds (Section 361(2)); current-pay interest at non-default contract rates (Section 361(1)); a superpriority administrative expense claim under Section 507(b); and comprehensive monthly reporting obligations. This combination of adequate protection measures is robust and fully satisfies the requirements of Section 361 of the Bankruptcy Code. See In re Ionosphere Clubs, Inc., 98 B.R. 174, 178 (Bankr. S.D.N.Y. 1989) (approving combination of replacement liens, adequate protection payments, and reporting obligations as adequate protection for use of cash collateral); see also In re Ames Dep't Stores, Inc., 115 B.R. 34, 39 (Bankr. S.D.N.Y. 1990) (adequate protection is a flexible concept to be determined on a case-by-case basis).

C. Section 362(d) — Protection Against Stay Relief

The provision of adequate protection to the Pre-Petition Secured Lenders serves the additional important function of protecting the Debtor's estate against any motion by the Pre-Petition Secured Lenders for relief from the automatic stay under Section 362(d)(1) of the Bankruptcy Code for "cause, including the lack of adequate protection of an interest in property of [a secured] party in interest." 11 U.S.C. § 362(d)(1). By providing the comprehensive adequate protection package described in Part V of this Motion, the Debtor addresses the Pre-Petition Secured Lenders' legitimate interests in the preservation and protection of their collateral, thereby eliminating any basis for a stay relief motion premised on a lack of adequate protection. See Timbers of Inwood Forest, 484 U.S. at 370–73 (discussing the interplay between adequate protection under Sections 361 and 362 of the Bankruptcy Code).

D. Case Law Support

Courts have broad discretion under Section 105(a) of the Bankruptcy Code to "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). This includes the authority to fashion adequate protection terms that are tailored to the specific circumstances of the case and that balance the interests of the debtor, the secured creditors, and the estate as a whole. See In re Carbone Cos., 395 B.R. 631, 635–36 (Bankr. N.D. Ohio 2008); In re SW Boston Hotel Venture, LLC, 460 B.R. 38, 46 (Bankr. D. Mass. 2011).

In the context of cash collateral motions filed at the outset of a Chapter 11 case, courts routinely authorize the debtor's use of cash collateral where the debtor demonstrates: (i) an urgent need to access cash collateral to maintain ongoing business operations and preserve the going-concern value of the estate; (ii) that the proposed adequate protection package is sufficient to protect the secured creditors' interests; and (iii) that the use of cash collateral is in the best interests of the estate and its stakeholders. See In re Lyondell Chem. Co., Case No. 09-10023 (Bankr. S.D.N.Y. Jan. 7, 2009) (authorizing use of cash collateral with replacement liens and adequate protection payments); In re General Growth Props., Inc., Case No. 09-11977 (Bankr. S.D.N.Y. Apr. 16, 2009) (same). The Debtor submits that all three conditions are satisfied here.

VIII. RELATIONSHIP TO DIP FINANCING MOTION

This Motion is filed concurrently with the DIP Financing Motion (the "DIP Financing Motion"), Docket No. [__], in which the Debtor seeks authority to enter into a senior secured superpriority debtor-in-possession credit facility in the aggregate principal amount of up to $175,000,000 (the "DIP Facility") with a syndicate of lenders consisting of:

(a) Ironclad Capital Partners LP, as administrative agent and lead lender, with a commitment of $100,000,000, having its principal office at 600 Lexington Avenue, 34th Floor, New York, New York 10022 (Kevin Pratt, Vice President);

(b) Ridgeline Opportunity Fund III LP, as co-lender, with a commitment of $50,000,000; and

The DIP Facility is governed by a Senior Secured Superpriority Debtor-in-Possession Credit Agreement (the "DIP Credit Agreement"), which is governed by the laws of the State of New York.

The adequate protection terms proposed in this Motion are interrelated with and consistent with the adequate protection provisions of the Proposed Interim Order and the Proposed Final Order on the DIP Financing Motion. The adequate protection package for the Pre-Petition Secured Lenders' consent to the use of cash collateral is incorporated into and forms an integral part of the overall adequate protection framework set forth in the DIP financing arrangements. The Debtor has negotiated the adequate protection terms with Prairie State Bank, N.A., and the DIP Lenders simultaneously to ensure consistency and to avoid duplication or conflict between the cash collateral order and the DIP orders.

The key terms of the DIP Facility are summarized as follows:

Facility Size and Draw Schedule. The DIP Facility provides for aggregate borrowings of up to $175,000,000. The Debtor anticipates an initial interim draw of $80,000,000 upon entry of the Interim DIP Order, which the Debtor expects to be entered on or about May 22, 2025, within five (5) business days of the Petition Date. The remaining $95,000,000 will be available for borrowing upon entry of the Final DIP Order, which the Debtor expects to be entered on or about June 19, 2025, within thirty-five (35) days of the Petition Date.

Interest Rate and Fees. The DIP Facility bears interest at a floating rate equal to SOFR plus 850 basis points per annum, with a SOFR floor of 4.00%, resulting in an effective minimum all-in interest rate of 12.50%. The DIP Credit Agreement provides for a closing fee of $3,500,000 (2.00% of the $175,000,000 total commitment), an exit fee of $1,750,000 (1.00% of the total commitment), and an unused line fee of 0.50% per annum on the undrawn portion of the facility.

Financial Covenants. The DIP Facility includes the following financial covenants: (i) minimum liquidity (defined as unrestricted cash plus undrawn availability under the DIP Facility) of $15,000,000 at all times; (ii) maximum cumulative budget variance of 15% on a rolling four-week basis, tested weekly; and (iii) minimum EBITDA of negative $5,000,000 for any rolling four-week period.

Maturity. The DIP Facility matures on the earliest to occur of: (a) May 15, 2026 (twelve months from the Petition Date); (b) the effective date of a confirmed Chapter 11 plan of reorganization; (c) the consummation of a sale of substantially all of the Debtor's assets pursuant to Section 363 of the Bankruptcy Code; or (d) the occurrence of an Event of Default under the DIP Credit Agreement that has not been cured or waived.

Milestones. The DIP Credit Agreement includes the following case milestones: (i) the Debtor shall file a plan of reorganization or a motion for authority to sell substantially all of its assets pursuant to Section 363 of the Bankruptcy Code by no later than October 12, 2025 (150 days after the Petition Date); and (ii) the Debtor shall obtain confirmation of the plan of reorganization or close the sale of substantially all of its assets by no later than February 8, 2026 (270 days after the Petition Date).

ABL Roll-Up. The DIP Facility contemplates the roll-up of $20,000,000 of pre-petition ABL obligations into the DIP Facility, reducing the outstanding pre-petition ABL balance from $72,300,000 to $52,300,000. The ABL roll-up is conditioned upon entry of the Final DIP Order.

The Debtor respectfully submits that the adequate protection terms proposed in this Motion for the use of cash collateral are identical to the adequate protection package provided to the Pre-Petition Secured Lenders under the DIP financing arrangements, ensuring full consistency across the Debtor's first-day financing motions and avoiding any duplication of adequate protection obligations that could create confusion or administrative burden.

IX. THE DIP BUDGET GOVERNS CASH COLLATERAL USAGE

The Debtor's use of cash collateral shall be governed by the 13-week DIP budget covering the period from May 15, 2025 through August 13, 2025 (the "Budget"), prepared by the Debtor in coordination with Claridge Advisory Group LLC, the Debtor's financial advisor, and filed as Exhibit A to the Proposed Interim DIP Order and cross-referenced as Exhibit A to this Motion.

The Budget provides a detailed, week-by-week projection of the Debtor's anticipated cash receipts and disbursements during the 13-week budget period. A summary of the Budget is as follows:

Reconciliation: $11,800,000 (beginning cash) + $80,000,000 (interim DIP draws) − $35,050,000 (total net cash outflow) = $56,750,000 (ending cash at Week 13). The projected ending cash balance of $56,750,000 exceeds the minimum liquidity covenant of $15,000,000 required under the DIP Credit Agreement by a substantial margin.

Budget Variance Testing. The Debtor's actual disbursements may not exceed budgeted disbursements by more than 15% on a rolling four-week basis, tested wee

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF IOWA CEDAR RAPIDS DIVISION
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DEBTOR'S MOTION FOR ENTRY OF AN ORDER AUTHORIZING USE OF CASH COLLATERAL PURSUANT TO 11 U.S.C. §§ 105(a), 361, 362, AND 363
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Greenfield Agricultural Partners LLC ("Greenfield," the "Debtor," or "GAP"), the above-captioned debtor and debtor-in-possession, by and through its undersigned counsel, Calderwood & Harkness LLP, hereby moves this Court (the "Motion") for entry of an order, substantially in the form attached hereto as Exhibit C (the "Proposed Order"), authorizing the Debtor to use cash collateral, as defined in Section 363(a) of Title 11 of the United States Code (the "Bankruptcy Code"), in the ordinary course of its business, in accordance with the 13-week budget attached as Exhibit A hereto (the "Budget"), and granting adequate protection to the pre-petition secured lenders as set forth herein. In support of this Motion, the Debtor respectfully represents as follows:
PRELIMINARY STATEMENT
Greenfield Agricultural Partners LLC is an Iowa limited liability company headquartered at 1400 Prairie Ridge Drive, Cedar Falls, Iowa 50613. On May 15, 2025 (the "Petition Date"), the Debtor filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code in this Court, commencing the above-captioned case. Since the Petition Date, the Debtor has continued to operate its business and manage its properties as a debtor-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code. No trustee, examiner, or official committee of unsecured creditors has been appointed in this case as of the date of this Motion, although the Debtor anticipates that the Office of the United States Trustee for Region 12 will seek to appoint an Official Committee of Unsecured Creditors in the ordinary course.
The Debtor is a vertically integrated agricultural chemicals manufacturer and distributor. The Debtor owns and operates three manufacturing plants located in Cedar Falls, Iowa; Decatur, Illinois; and Jonesboro, Arkansas. In addition, the Debtor operates fourteen regional distribution centers strategically positioned across the Midwest and Mid-South regions of the United States to serve its customer base of approximately 4,800 agricultural dealers, cooperatives, and large-scale farming operations. The Debtor also owns and maintains a 640-acre research and development farm in Ames, Iowa, which serves as the primary testing site for new product formulations and EPA-regulated field trials. As of the Petition Date, the Debtor employs approximately 2,300 people across its manufacturing, distribution, research, and corporate operations.
This Motion is filed concurrently with the Debtor's Emergency Motion for Entry of Interim and Final Orders Authorizing Debtor-in-Possession Financing (the "DIP Financing Motion"), in which the Debtor seeks authority to enter into a $175,000,000 senior secured superpriority debtor-in-possession credit facility (the "DIP Facility") with a syndicate of lenders led by Ironclad Capital Partners LP. The adequate protection terms proposed herein are fully consistent with, and incorporated into, the adequate protection provisions set forth in the Proposed Interim and Final DIP Orders.
The Debtor's pre-petition secured lenders, acting through Prairie State Bank, N.A. ("Prairie State Bank" or "PSB"), as administrative agent under both the pre-petition First Lien Credit Agreement and the pre-petition ABL Revolving Credit Facility, hold security interests in substantially all of the Debtor's assets. These assets include, without limitation, all cash, cash equivalents, deposit accounts, accounts receivable, inventory, and proceeds thereof, all of which constitute "cash collateral" within the meaning of Section 363(a) of the Bankruptcy Code. The Debtor cannot use this cash collateral without the consent of the secured parties or authorization from this Court, conditioned upon adequate protection of the secured parties' interests.
The Debtor requires immediate authority to use cash collateral in the ordinary course of its business. Without such authority, the Debtor will be unable to fund ongoing operations, make payroll for its approximately 2,300 employees, purchase critical chemical raw materials necessary for manufacturing, fulfill existing customer orders during the peak spring application and summer growing seasons, and maintain the going-concern value of the estate for the benefit of all stakeholders. The consequences of any interruption in the Debtor's ability to access cash collateral would be swift and severe, resulting in the shutdown of manufacturing operations, the loss of key employees and customer relationships, and a dramatic erosion of the value of the Debtor's estate.
Prairie State Bank, N.A., as administrative agent under the pre-petition First Lien Credit Agreement and the pre-petition ABL Revolver, has indicated its conditional consent to the Debtor's use of cash collateral, subject to the adequate protection terms described in detail in Part V of this Motion and entry of Court orders incorporating such terms. A formal Consent Letter from Thomas Whitaker, Senior Vice President, Loan Workout Group, at Prairie State Bank, is expected by May 20, 2025, and will be filed as a supplement to this Motion upon receipt.
The Debtor submits that the adequate protection package proposed herein — consisting of replacement liens, a superpriority administrative expense claim under Section 507(b), current-pay interest at non-default contract rates, and comprehensive monthly reporting obligations — is more than sufficient to protect the pre-petition secured lenders' interests in the cash collateral during the pendency of this case.
I. JURISDICTION AND VENUE
This Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and 1334 and the Standing Order of Reference entered by the United States District Court for the Northern District of Iowa. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2), specifically subsections (D) (turnover of property of the estate), (M) (orders approving the use or lease of property, including the use of cash collateral under Section 363 of the Bankruptcy Code), and (O) (other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship). The Debtor confirms that it consents to the entry of final orders by this Court in connection with this Motion to the extent that it is later determined that this Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution.
Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409. The Debtor's principal place of business has been located in Cedar Falls, Iowa, within the Northern District of Iowa, for more than 180 days prior to the Petition Date.
The statutory and legal predicates for the relief sought herein are Sections 105(a), 361, 362, and 363 of the Bankruptcy Code, 11 U.S.C. §§ 105(a), 361, 362, and 363, and Rules 2002, 4001, and 9014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), and the Local Rules of the United States Bankruptcy Court for the Northern District of Iowa.
II. BACKGROUND
A. The Debtor's Business Operations
Greenfield Agricultural Partners LLC is an Iowa limited liability company (EIN: 42-8837291) organized under the Iowa Revised Uniform Limited Liability Company Act, Iowa Code Chapter 489. The Debtor is engaged in the manufacture, formulation, distribution, and sale of specialty agricultural chemicals, including herbicides, fungicides, adjuvants, surfactants, and seed treatment products. The Debtor's product portfolio includes more than 120 proprietary and licensed formulations, serving a diverse customer base of agricultural dealers, farmer cooperatives, custom applicators, and large-scale row-crop farming operations across a fourteen-state footprint.
The Debtor's flagship herbicide product, ClearGuard XR, is a broadleaf post-emergent herbicide designed for use in corn and soybean applications. ClearGuard XR has historically accounted for approximately 22% of the Debtor's total revenues and approximately 31% of gross profit. The product is currently subject to a delayed re-registration process by the United States Environmental Protection Agency ("EPA"), which has created significant market uncertainty and contributed to the decline in the Debtor's sales volumes and financial performance during fiscal year 2024. The Debtor's regulatory affairs team, in coordination with its EPA counsel, anticipates that the re-registration decision will be issued by the EPA during the third quarter of 2025.
The Debtor's manufacturing operations are conducted at three plants, each of which is critical to the Debtor's ability to fulfill customer orders and maintain its market position:
(a) Cedar Falls, Iowa — The Debtor's headquarters facility, located at 1400 Prairie Ridge Drive, Cedar Falls, Iowa 50613, serves as the primary manufacturing and formulation plant. This facility has an annual production capacity of approximately 85 million pounds of finished product and houses the Debtor's corporate offices, quality assurance laboratories, and primary distribution hub. The Cedar Falls plant recently underwent a $4,200,000 compressor overhaul, of which approximately $1,600,000 remains unpaid to Norris Industrial Services LLC as of the Petition Date.
(b) Decatur, Illinois — The Debtor's secondary manufacturing plant, located at 2200 Industrial Boulevard, Decatur, Illinois 62521, specializes in the production of fungicide and seed treatment formulations. This facility has an annual production capacity of approximately 52 million pounds and employs approximately 480 workers.
(c) Jonesboro, Arkansas — The Debtor's southern manufacturing facility, located at 815 County Road 740, Jonesboro, Arkansas 72401, focuses on adjuvant and surfactant production for the Mid-South cotton and rice markets. This facility has an annual production capacity of approximately 38 million pounds and employs approximately 310 workers.
In addition to its manufacturing operations, the Debtor operates fourteen regional distribution centers across the Midwest and Mid-South, strategically located to provide next-day delivery capability to the majority of its customer base. These distribution centers are critical to the Debtor's competitive position and customer service capabilities, particularly during the compressed spring application season when timely product delivery is essential.
The Debtor also owns and operates a 640-acre research and development farm located at 4500 University Boulevard, Ames, Iowa 50010. This facility serves as the Debtor's primary site for field trials, product efficacy testing, and regulatory studies required for EPA product registrations and re-registrations. The R&D farm is staffed by approximately 45 scientists, agronomists, and field technicians and represents a significant asset of the estate.
The Debtor's business is highly seasonal in nature. The agricultural chemicals industry in the Midwest and Mid-South regions experiences peak demand during the second and third calendar quarters of each year, corresponding to the spring planting and application season (approximately March through June) and the summer growing season (approximately June through August). During these peak periods, the Debtor typically generates approximately 65% to 70% of its annual revenues. The Budget period — May 15, 2025 through August 13, 2025 — captures the tail end of the spring application season and the entirety of the summer growing season, making uninterrupted operations during this period absolutely critical to the preservation of the Debtor's going-concern value and the maximization of recoveries for all stakeholders.
As of the Petition Date, the Debtor employs approximately 2,300 people across its manufacturing plants, distribution centers, R&D farm, and corporate offices. The Debtor's workforce includes skilled chemical engineers, plant operators, logistics professionals, sales representatives, agronomists, and administrative and support staff. The retention of this workforce is essential to the Debtor's ability to operate its business during the Chapter 11 case and to effectuate a successful restructuring.
B. Pre-Petition Capital Structure
The Debtor's pre-petition capital structure consists of the following funded debt obligations and unsecured claims:
1. First Lien Term Loan
The Debtor is the borrower under a First Lien Term Loan Credit Agreement dated as of November 15, 2021 (as amended, restated, supplemented, or otherwise modified from time to time, the "First Lien Credit Agreement"), by and among the Debtor, as borrower, Prairie State Bank, N.A., as administrative agent and collateral agent (in such capacity, the "First Lien Agent"), and the lenders party thereto from time to time (the "First Lien Lenders"). As of the Petition Date, the aggregate outstanding principal balance under the First Lien Credit Agreement was $310,000,000. The First Lien Term Loan bears interest at a floating rate equal to the Secured Overnight Financing Rate ("SOFR") plus 450 basis points per annum. The stated maturity date of the First Lien Term Loan is November 15, 2026. The obligations under the First Lien Credit Agreement are secured by a first-priority lien on substantially all assets of the Debtor, including, without limitation, all deposit accounts, general intangibles, equipment, real property (including the Cedar Falls, Decatur, and Jonesboro manufacturing plants and the Ames R&D farm), intellectual property, and all proceeds thereof.
2. ABL Revolving Credit Facility
The Debtor is the borrower under an Asset-Based Revolving Credit Agreement dated as of March 1, 2023 (as amended, restated, supplemented, or otherwise modified from time to time, the "ABL Credit Agreement" and, together with the First Lien Credit Agreement, the "Pre-Petition Credit Agreements"), by and among the Debtor, as borrower, Prairie State Bank, N.A., as administrative agent and collateral agent (in such capacity, the "ABL Agent" and, together with the First Lien Agent, the "Pre-Petition Agent"), and the lenders party thereto from time to time (the "ABL Lenders"), including Hawthorn National Bank and Northland Savings Bank, F.S.B., as participating lenders. The ABL Credit Agreement provides for a revolving credit facility with a total commitment of $95,000,000 (the "ABL Revolver"). As of the Petition Date, the aggregate outstanding principal balance drawn under the ABL Revolver was $72,300,000. The ABL Revolver bears interest at a floating rate equal to SOFR plus 275 basis points per annum. The stated maturity date of the ABL Revolver is May 1, 2026. The obligations under the ABL Credit Agreement are secured by a first-priority lien on the Debtor's accounts receivable and inventory, pursuant to a split-collateral intercreditor arrangement with the First Lien Lenders (the "Intercreditor Agreement"). Under the Intercreditor Agreement, the ABL Lenders hold a first-priority lien on receivables and inventory, and the First Lien Lenders hold a first-priority lien on all other collateral, with each group holding a second-priority lien on the other group's primary collateral.
3. Senior Unsecured Notes
The Debtor is the issuer of 9.50% Senior Unsecured Notes due March 15, 2027 (the "Senior Unsecured Notes"), issued pursuant to an Indenture dated as of March 15, 2022 (the "Indenture"), by and between the Debtor, as issuer, and Meridian Trust Company, as indenture trustee (the "Indenture Trustee"). As of the Petition Date, the aggregate outstanding principal balance of the Senior Unsecured Notes was $84,200,000. The Senior Unsecured Notes bear interest at a fixed rate of 9.50% per annum, payable semi-annually on March 15 and September 15 of each year. The Senior Unsecured Notes are unsecured obligations of the Debtor and do not benefit from any lien on the Debtor's assets.
4. Trade and Other Unsecured Claims
As of the Petition Date, the Debtor estimates that it owes approximately $22,700,000 in trade payables and other general unsecured claims to vendors, suppliers, service providers, and other creditors. The Debtor's top five chemical raw material suppliers are owed an aggregate of approximately $9,400,000 as of the Petition Date. These suppliers are critical to the Debtor's ability to continue manufacturing operations, and the Debtor has concurrently filed a Motion for Authority to Pay Critical Vendors (up to $12,000,000) in connection with these and other essential vendor relationships.
5. Summary of Pre-Petition Capital Structure
Total pre-petition secured debt: $382,300,000 ($310,000,000 + $72,300,000). Total unsecured claims pool: $106,900,000 ($84,200,000 Senior Unsecured Notes + $22,700,000 trade and other unsecured claims).
C. Events Leading to the Chapter 11 Filing
The Debtor's decision to seek relief under Chapter 11 of the Bankruptcy Code was precipitated by a confluence of operational, regulatory, and financial challenges that, taken together, rendered the Debtor unable to service its funded debt obligations and comply with the financial covenants in its Pre-Petition Credit Agreements.
Leverage Covenant Breach. As of December 31, 2024, the Debtor breached the Total Net Leverage Ratio covenant contained in Section 7.11(a) of the First Lien Credit Agreement. The First Lien Credit Agreement requires the Debtor to maintain a Total Net Leverage Ratio (defined as Consolidated Net Debt divided by Consolidated Adjusted EBITDA for the most recently ended four fiscal quarters) of no greater than 6.50 to 1.00. As of December 31, 2024, the Debtor's actual Total Net Leverage Ratio was approximately 9.82 to 1.00, calculated as follows: Consolidated Net Debt of $370,500,000 ($310,000,000 First Lien Term Loan + $72,300,000 drawn ABL Revolver − $11,800,000 unrestricted cash) divided by Consolidated Adjusted EBITDA for the twelve months ended December 31, 2024, of $37,700,000. This breach constituted an Event of Default under the First Lien Credit Agreement and a cross-default under the ABL Credit Agreement.
Forbearance Agreement. Following the leverage covenant breach, the Debtor entered into a Forbearance Agreement with Prairie State Bank, N.A., as administrative agent, dated January 31, 2025 (the "Forbearance Agreement"), pursuant to which the Pre-Petition Agent and the Required Lenders agreed to forbear from exercising remedies with respect to the covenant breach for a period expiring on May 1, 2025. The Forbearance Agreement was conditioned upon, among other things, the Debtor's retention of a financial advisor, the commencement of a comprehensive review of the Debtor's strategic and financial alternatives, and compliance with certain reporting obligations. The Forbearance Agreement expired on May 1, 2025, without extension, leaving the Pre-Petition Agent and the Pre-Petition Lenders free to exercise any and all remedies available under the Pre-Petition Credit Agreements and applicable law.
Missed Interest Payment on Senior Unsecured Notes. The Debtor failed to make the semi-annual interest payment due on March 15, 2025, on the Senior Unsecured Notes. The total interest payment due was $3,999,500 ($84,200,000 × 9.50% ÷ 2). Of this amount, the Debtor made a partial payment of $318,250, leaving $3,681,250 unpaid. The Indenture provides for a 30-day grace period for missed interest payments, which expired on April 14, 2025, at which point the failure to pay constituted an Event of Default under the Indenture. The Indenture Trustee, Meridian Trust Company, delivered a notice of default to the Debtor on April 17, 2025.
Operational Causes. The Debtor's financial deterioration was driven by several operational factors, including: (i) severe drought conditions during the 2024 growing season across the Debtor's primary market areas, which depressed demand for the Debtor's herbicide and fungicide products as farmers reduced crop input spending; (ii) depressed commodity pricing for corn, soybeans, and cotton, which further constrained farmer purchasing power and reduced the Debtor's sales volumes; and (iii) the delayed EPA re-registration of ClearGuard XR, the Debtor's flagship herbicide product, which created significant market uncertainty and led certain customers and dealers to defer purchases pending regulatory clarity.
Fiscal Year 2024 Financial Performance. For the fiscal year ended December 31, 2024, the Debtor reported total revenues of $612,400,000 (a decline of approximately 14% from the prior year) and Adjusted EBITDA of $38,700,000 (a decline of approximately 41% from the prior year). As of the Petition Date, the Debtor had unrestricted cash on hand of approximately $11,800,000. Based on the preliminary analysis of the Debtor's financial advisor, Claridge Advisory Group LLC, the Debtor's estimated enterprise value falls within a range of $280,000,000 to $340,000,000, with a mid-point of approximately $310,000,000.
D. The Chapter 11 Case
The Debtor filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code on May 15, 2025, in the United States Bankruptcy Court for the Northern District of Iowa, Cedar Rapids Division. The case has been assigned Case No. 25-01147 and has been assigned to the Honorable Margaret R. Dunleavy. This is a single-entity filing; the Debtor has no subsidiary entities that are debtors in this or any other bankruptcy case at this time.
The Debtor's professional advisors retained or to be retained in this case include the following:
(a) Debtor's Counsel: Calderwood & Harkness LLP, with Nathaniel Bower serving as the responsible partner, Colette Whitman as billing partner, Gabrielle Moss as lead associate, and Amy Chesterton as working associate. Calderwood & Harkness LLP maintains its principal office at 450 Park Avenue, New York, New York 10022, and its Iowa office at 801 Grand Avenue, Suite 3300, Des Moines, Iowa 50309.
(b) Debtor's Financial Advisor: Claridge Advisory Group LLC, with Nolan Ashworth, Managing Director, serving as the lead engagement professional.
(c) Debtor's Auditors and Tax Advisors: Holloway & Birch LLP, with Andrew Sorensen, Audit Partner, serving as the lead engagement partner.
(d) Appraiser: Bellwether Valuation Services Inc., with Gregory Pineda, Senior Managing Director, leading the engagement.
(e) Registered Agent: Capitol Registered Agents Inc., 400 E. Court Avenue, Suite 200, Des Moines, Iowa 50309.
III. IDENTIFICATION OF CASH COLLATERAL
A. Definition of Cash Collateral
Section 363(a) of the Bankruptcy Code defines "cash collateral" as:
cash, negotiable instruments, documents of title, securities, deposit accounts, or other cash equivalents whenever acquired in which the estate and an entity other than the estate have an interest and includes the proceeds, products, offspring, rents, or profits of property and the fees, charges, accounts, or other payments for the use or occupancy of rooms and other public facilities in hotels, motels, or other lodging properties subject to a security interest as provided in section 552(b) of this title, whether existing before or after the commencement of a case under this title.
11 U.S.C. § 363(a). The Debtor's cash on hand (approximately $11,800,000 as of the Petition Date), accounts receivable, inventory and inventory proceeds, and deposit account balances held at banking institutions constitute cash collateral in which Prairie State Bank, N.A., as administrative agent for the pre-petition First Lien Lenders and the ABL Revolver Lenders, holds a security interest pursuant to the Pre-Petition Credit Agreements. Additionally, to the extent that any post-petition proceeds of pre-petition collateral constitute cash or cash equivalents, such proceeds also constitute cash collateral subject to the liens of the pre-petition secured lenders pursuant to Section 552(b) of the Bankruptcy Code.
B. Pre-Petition Liens on Cash Collateral
The cash collateral that is the subject of this Motion is encumbered by the following pre-petition security interests:
First Lien Term Loan Collateral. Pursuant to the First Lien Credit Agreement and the related Security Agreement, Pledge Agreement, intellectual Property Security Agreement, and Mortgage Documents, the First Lien Lenders hold a first-priority security interest in substantially all assets of the Debtor, including, without limitation, all deposit accounts, cash and cash equivalents, general intangibles, equipment, fixtures, real property (including the manufacturing plants in Cedar Falls, Iowa; Decatur, Illinois; and Jonesboro, Arkansas, and the R&D farm in Ames, Iowa), intellectual property (including all patents, trademarks, trade names, and EPA product registrations), and all proceeds, products, and profits thereof. Under the Intercreditor Agreement, the First Lien Lenders hold a second-priority lien on accounts receivable and inventory (which are the primary collateral of the ABL Lenders).
ABL Revolver Collateral. Pursuant to the ABL Credit Agreement and the related Security Agreement, the ABL Lenders hold a first-priority security interest in the Debtor's accounts receivable and inventory, including all proceeds thereof, under a split-collateral intercreditor arrangement governed by the Intercreditor Agreement. Under the Intercreditor Agreement, the ABL Lenders hold a second-priority lien on all other collateral of the Debtor (which is the primary collateral of the First Lien Lenders).
Prairie State Bank, N.A., serves as administrative agent and collateral agent under both the First Lien Credit Agreement and the ABL Credit Agreement, and accordingly holds the primary security interests in the cash collateral on behalf of the pre-petition secured lender groups.
Unsecured Creditors. The Senior Unsecured Notes ($84,200,000 outstanding, with Meridian Trust Company serving as indenture trustee) and the Debtor's trade creditors and other general unsecured creditors (approximately $22,700,000 in the aggregate) are unsecured obligations. These creditors do not hold any security interest, lien, or other encumbrance on the Debtor's cash collateral or any other assets.
C. Estimation of Cash Collateral Usage
The Debtor's projected use of cash collateral during the initial 13-week budget period (May 15, 2025 through August 13, 2025) has been prepared by the Debtor in coordination with its financial advisor, Claridge Advisory Group LLC, and is summarized as follows:
In addition to operating disbursements, the Debtor projects the following additional cash outlays during the 13-week budget period:
(a) Restructuring professional fees (including fees and expenses of the Debtor's counsel, financial advisor, auditors, and other retained professionals, as well as estimated fees and expenses of any official committee professionals): $16,100,000;
(b) Debt service and adequate protection payments to the pre-petition secured lenders: $11,050,000; and
(c) Capital expenditures (including critical maintenance and safety-related expenditures at the three manufacturing plants): $3,600,000.
Total projected net cash outflow over the 13-week budget period is $35,050,000. The detailed 13-week budget is attached hereto as Exhibit A (cross-referenced to Exhibit A of the Proposed Interim DIP Order filed in connection with the DIP Financing Motion).
The Debtor's use of cash collateral during this period is essential to fund payroll for approximately 2,300 employees, to purchase chemical raw materials from critical suppliers necessary for manufacturing operations, to maintain continuous operations at all three manufacturing plants during peak selling season, to service existing customer orders and maintain customer relationships, and to preserve the going-concern value of the estate. Any disruption in the Debtor's access to cash collateral would result in the immediate cessation of manufacturing operations, the loss of key employees and customer relationships, and an irreparable destruction of estate value.
IV. RELIEF REQUESTED
By this Motion, the Debtor respectfully requests that this Court enter an order, pursuant to Sections 105(a), 361, 362, and 363 of the Bankruptcy Code:
(a) Authorizing the Debtor to use Cash Collateral (as defined herein) in the ordinary course of its business operations, in accordance with the 13-week DIP budget attached hereto as Exhibit A (the "Budget"), as such Budget may be modified from time to time with the consent of the DIP Lenders and the Pre-Petition Agent;
(b) Granting adequate protection to Prairie State Bank, N.A., as pre-petition administrative agent and collateral agent, and the pre-petition First Lien Lenders and ABL Revolver Lenders (collectively, the "Pre-Petition Secured Lenders"), for any diminution in the value of their interests in the Cash Collateral and other pre-petition collateral resulting from the Debtor's use, sale, or lease thereof and/or the imposition of the automatic stay pursuant to Section 362(a) of the Bankruptcy Code, in the form of (i) replacement liens on substantially all post-petition assets and proceeds, (ii) a superpriority administrative expense claim under Section 507(b) of the Bankruptcy Code, (iii) current-pay interest at non-default contract rates, and (iv) monthly financial and collateral reporting;
(c) Scheduling a final hearing on this Motion, to be heard in conjunction with the final hearing on the DIP Financing Motion, on or before June 19, 2025; and
(d) Granting such other and further relief as this Court deems just and proper.
V. ADEQUATE PROTECTION FOR PRE-PETITION SECURED LENDERS
A. Legal Standard — Section 361
Section 363(c)(2) of the Bankruptcy Code provides that a debtor-in-possession may not use, sell, or lease cash collateral unless (A) each entity that has an interest in such cash collateral consents, or (B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of Section 363 of the Bankruptcy Code. 11 U.S.C. § 363(c)(2).
Section 363(e) of the Bankruptcy Code further provides that, upon request of an entity that has an interest in property used, sold, or leased by a debtor-in-possession, the court shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest. 11 U.S.C. § 363(e). The burden of proof on the issue of adequate protection rests with the debtor-in-possession. 11 U.S.C. § 363(p)(1).
Section 361 of the Bankruptcy Code sets forth the forms of adequate protection that may be provided to a secured party whose interest in property may be diminished by the debtor's use of such property. These forms include:
(1) Requiring the debtor-in-possession to make periodic cash payments to the secured party to the extent that the stay, use, sale, or lease results in a decrease in the value of the secured party's interest in the property. 11 U.S.C. § 361(1);
(2) Providing the secured party with an additional or replacement lien to the extent that the stay, use, sale, or lease results in a decrease in the value of the secured party's interest in the property. 11 U.S.C. § 361(2); and
(3) Granting such other relief, other than an administrative expense claim, as will result in the realization by the secured party of the "indubitable equivalent" of the secured party's interest in the property. 11 U.S.C. § 361(3).
The concept of adequate protection is flexible and is to be determined on a case-by-case basis. See In re Cont'l Airlines, 91 F.3d 553, 556 (3d Cir. 1996); In re Swedeland Dev. Grp., Inc., 16 F.3d 552, 564 (3d Cir. 1994). The adequate protection requirement is designed to insure that the secured creditor receives the value of its bargained-for position during the pendency of the bankruptcy case. See United Sav. Ass'n of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 370 (1988).
B. Proposed Adequate Protection Package
The Debtor proposes the following adequate protection package for the benefit of the Pre-Petition Secured Lenders, consistent with the terms of the Adequate Protection Stipulation negotiated between the Debtor and Prairie State Bank, N.A. (through Thomas Whitaker, Senior Vice President, Loan Workout Group, and Angela Reeves, Vice President, Loan Administration):
1. Replacement Liens. Prairie State Bank, N.A., as administrative agent and collateral agent for the Pre-Petition Secured Lenders (including the pre-petition First Lien Lenders and the ABL Revolver Lenders, the latter including participating banks Hawthorn National Bank and Northland Savings Bank, F.S.B.), shall receive valid, binding, enforceable, non-avoidable, and automatically perfected replacement liens (the "Replacement Liens") on all post-petition assets of the Debtor and all proceeds, products, rents, and profits thereof, to the same extent and with the same validity, priority, and enforceability as the pre-petition liens held by the Pre-Petition Secured Lenders, but subject to and junior only to:
(i) the liens and superpriority claims granted to the DIP Lenders under the DIP Credit Agreement and the Interim and Final DIP Orders (collectively, the "DIP Liens"); and
(ii) the Carve-Out (as defined in the DIP Credit Agreement), consisting of (A) all accrued and unpaid professional fees and disbursements incurred by the Debtor's estate professionals and any official committee professionals at any time prior to the delivery of a Carve-Out Trigger Notice (as defined in the DIP Credit Agreement); (B) a post-trigger reserve of $2,500,000 for professional fees and disbursements of estate professionals and official committee professionals incurred after delivery of a Carve-Out Trigger Notice; and (C) a post-trigger reserve of $500,000 for fees payable to the United States Trustee pursuant to 28 U.S.C. § 1930 and the Clerk of this Court, for a total aggregate post-trigger Carve-Out of $3,000,000.
The Replacement Liens shall have the same relative priority, validity, and enforceability as the Pre-Petition Secured Lenders' pre-petition liens, including the relative priorities established by the Intercreditor Agreement as between the First Lien Lenders and the ABL Lenders. The Replacement Liens shall be deemed perfected without the necessity of the filing of any financing statements, mortgages, or other documents, or the taking of any other action that would otherwise be required under applicable non-bankruptcy law to perfect a security interest or lien.
2. Superpriority Administrative Expense Claim. To the extent that the adequate protection provided to the Pre-Petition Secured Lenders (including the Replacement Liens, current-pay interest, and reporting obligations) proves insufficient to protect the Pre-Petition Secured Lenders against the diminution in value of their interests in the pre-petition collateral and cash collateral, Prairie State Bank, N.A., on behalf of the Pre-Petition Secured Lenders, shall be granted a superpriority administrative expense claim (the "Adequate Protection Superpriority Claim") against the Debtor's estate pursuant to Section 507(b) of the Bankruptcy Code, which claim shall have priority over all administrative expense claims and unsecured claims against the Debtor and its estate under Sections 503(b) and 507(b) of the Bankruptcy Code, and any and all other provisions of the Bankruptcy Code; provided, however, that the Adequate Protection Superpriority Claim shall be junior in priority to the superpriority administrative expense claim granted to the DIP Lenders under Section 364(c)(1) of the Bankruptcy Code pursuant to the Interim and Final DIP Orders.
3. Current-Pay Interest. The Debtor shall make current-pay interest payments to the Pre-Petition Secured Lenders at the non-default contract rates, as follows:
(i) On the First Lien Term Loan ($310,000,000 outstanding): interest at the rate of SOFR plus 450 basis points per annum, payable monthly in arrears; and
(ii) On the ABL Revolver ($72,300,000 outstanding): interest at the rate of SOFR plus 275 basis points per annum, payable monthly in arrears.
The foregoing current-pay interest payments constitute adequate protection payments and are reflected in the Budget as debt service and adequate protection line items, allocated as follows:
The Debtor submits that payment of current-pay interest at the non-default contract rates is appropriate under the circumstances and constitutes adequate protection within the meaning of Section 361(1) of the Bankruptcy Code. The Debtor notes that the non-default contract rate, rather than the default rate, is the appropriate benchmark for adequate protection payments during a Chapter 11 case. See, e.g., In re Residential Capital, LLC, 501 B.R. 549, 613–14 (Bankr. S.D.N.Y. 2013); In re Taddeo, 685 F.2d 24, 28 (2d Cir. 1982).
4. Monthly Reporting. The Debtor shall provide Prairie State Bank, N.A., as Pre-Petition Agent, with a comprehensive monthly reporting package (the "Monthly Report"), to be delivered within twenty (20) calendar days following the end of each calendar month, consisting of:
(i) A rolling 13-week cash flow forecast, updated to reflect actual results for the most recently completed period and revised projections for the remaining forecast period;
(ii) Budget-to-actual variance reports, showing the actual receipts and disbursements for each completed week as compared to the corresponding line items in the Budget, tested on a rolling four-week basis;
(iii) Collateral status reports, including (A) accounts receivable aging reports (detailing current, 30-day, 60-day, 90-day, and 90+-day aging buckets), (B) inventory reports (detailing raw materials, work-in-process, and finished goods by location and product category), and (C) collateral appraisal updates from Bellwether Valuation Services Inc. (Gregory Pineda, Senior Managing Director), to the extent available; and
(iv) Monthly financial statements, including a balance sheet, income statement, and statement of cash flows, prepared by the Debtor with the assistance of its auditors and tax advisors, Holloway & Birch LLP (Andrew Sorensen, Audit Partner).
The reporting obligations described above are in addition to any reporting requirements imposed by the DIP Credit Agreement, the Interim and Final DIP Orders, or orders of this Court.
C. Prairie State Bank Consent
Prairie State Bank, N.A., as Pre-Petition Agent, has indicated its conditional consent to the Debtor's use of cash collateral in the ordinary course of business, subject to the adequate protection terms described in this Part V and the entry of Court orders incorporating such terms. The Debtor's counsel and financial advisor have been in continuous discussions with Thomas Whitaker, Senior Vice President, Loan Workout Group, and Angela Reeves, Vice President, Loan Administration, at Prairie State Bank, N.A., regarding the terms of the adequate protection package, and the parties have reached agreement in principle on the terms described herein.
A formal Consent Letter executed by Thomas Whitaker on behalf of Prairie State Bank, N.A., as Pre-Petition Agent, is expected to be delivered by May 20, 2025. Upon receipt, the Debtor will promptly file the Consent Letter as a supplement to this Motion and will make it available to all parties in interest.
In addition, the ABL Revolver Lenders — Prairie State Bank, N.A., Hawthorn National Bank, and Northland Savings Bank, F.S.B. — have indicated their support for the Debtor's use of cash collateral and the adequate protection terms described herein, contingent upon the consummation of the roll-up of $20,000,000 of pre-petition ABL obligations into the DIP Facility, as set forth in the DIP Credit Agreement filed in connection with the DIP Financing Motion. The ABL roll-up is designed to reduce the outstanding pre-petition ABL balance from $72,300,000 to $52,300,000, providing additional collateral cushion to the remaining pre-petition ABL Lenders and aligning the interests of the pre-petition and post-petition lending groups.
D. Equity Cushion and Collateral Coverage
The Debtor's total pre-petition secured debt is approximately $382,300,000, consisting of $310,000,000 under the First Lien Term Loan and $72,300,000 drawn under the ABL Revolver.
The Debtor's estimated enterprise value, based on the preliminary analysis of Claridge Advisory Group LLC and supported by the ongoing appraisal work of Bellwether Valuation Services Inc. (Gregory Pineda, Senior Managing Director), falls within a range of $280,000,000 to $340,000,000, with a mid-point of approximately $310,000,000. While the mid-point of the estimated enterprise value range is less than the total pre-petition secured debt, the Debtor submits that the following factors provide the Court with a sufficient basis to find that the proposed adequate protection package adequately protects the Pre-Petition Secured Lenders' interests:
(a) The Debtor's liquid assets and ongoing revenue generation during the peak selling season — with projected operating receipts of $129,600,000 over the 13-week budget period — provide substantial cash flow to support adequate protection payments and the preservation of collateral value;
(b) The Replacement Liens extend to all post-petition assets and proceeds, providing the Pre-Petition Secured Lenders with security interests in newly generated receivables, inventory, and other assets that will be created during the post-petition period;
(c) The current-pay interest payments of $11,050,000 over the 13-week period compensate the Pre-Petition Secured Lenders for the time value of their collateral;
(d) The comprehensive reporting obligations provide the Pre-Petition Secured Lenders with real-time visibility into the status and value of their collateral;
(e) The Section 507(b) Adequate Protection Superpriority Claim provides an additional layer of protection in the event that the other adequate protection measures prove insufficient; and
(f) The formal collateral appraisals being prepared by Bellwether Valuation Services Inc. will provide more precise valuations of the Debtor's real property, equipment, intellectual property, and other assets, and will be made available to the Pre-Petition Agent and the Court upon completion.
The Debtor respectfully submits that the totality of the proposed adequate protection package is more than sufficient to protect the Pre-Petition Secured Lenders' interests in the cash collateral and other pre-petition collateral, and that the Court should authorize the Debtor's use of cash collateral on the terms described herein.
VI. THE DEBTOR'S NEED TO USE CASH COLLATERAL IS URGENT
The Debtor's need to use cash collateral is immediate and urgent, and any delay in granting the relief requested herein would result in irreparable harm to the Debtor's estate and all of its stakeholders.
Insufficient Cash Reserves. As of the Petition Date, the Debtor had unrestricted cash on hand of only $11,800,000. Based on the Debtor's projected weekly operating disbursements (averaging approximately $10,300,000 per week during the first four weeks of the budget period), the Debtor's existing cash reserves are insufficient to fund more than approximately eight to ten business days of operating disbursements without access to cash collateral and DIP financing. Without immediate access to cash collateral, the Debtor will exhaust its available cash within the first two weeks following the Petition Date, forcing the cessation of all manufacturing and distribution operations.
Seasonal Business Critical Period. The Debtor's business is highly seasonal, with peak sales occurring during the second and third calendar quarters of each year. The Budget period — May 15, 2025 through August 13, 2025 — captures the tail end of the spring application season and the entirety of the summer growing season, which together represent the most critical period of the Debtor's annual operating cycle. Any interruption in the Debtor's operations during this period would cause irreparable harm to the estate and its stakeholders. Customers who are unable to obtain products from the Debtor during the spring and summer seasons will turn to competitors, and the resulting loss of customer relationships and market share may be permanent and unrecoverable.
Continuous Manufacturing Operations. The Debtor's three manufacturing plants in Cedar Falls, Iowa; Decatur, Illinois; and Jonesboro, Arkansas require continuous operation to meet customer demand during the peak selling season. These plants operate on multi-shift schedules and produce specialty chemical formulations that require precise process control and quality assurance. The Cedar Falls plant, the Debtor's largest and most critical manufacturing facility, recently underwent a $4,200,000 compressor overhaul, of which approximately $1,600,000 remains unpaid to Norris Industrial Services LLC. Completion of the compressor overhaul is essential to maintaining production capacity at the Cedar Falls facility, and the Debtor's ability to satisfy this critical vendor obligation depends upon its access to cash collateral.
Critical Supplier Relationships. The Debtor's top five chemical raw material suppliers are owed an aggregate of approximately $9,400,000 in pre-petition trade payables as of the Petition Date. These suppliers provide essential chemical feedstocks, active ingredients, and formulation components without which the Debtor cannot manufacture its products. Many of these suppliers operate on a just-in-time delivery basis, and any disruption in the supply chain would result in production shutdowns at one or more of the Debtor's manufacturing plants within days. The Debtor has concurrently filed a Motion for Authority to Pay Critical Vendors (up to $12,000,000) to address these essential supplier relationships, and the success of that motion depends upon the Debtor's ability to use cash collateral to fund ongoing purchases from these suppliers in the post-petition period.
Employee Payroll and Benefits. The Debtor employs approximately 2,300 people across its manufacturing, distribution, research, and corporate operations. The Debtor's next payroll cycle occurs on or about May 23, 2025, with an estimated gross payroll (including wages, salaries, payroll taxes, and employee benefits) of approximately $4,800,000. Without authority to use cash collateral, the Debtor will be unable to make payroll, resulting in the immediate loss of critical employees and the likely cessation of all business operations. The loss of skilled manufacturing employees, in particular, would be devastating to the estate, as these workers possess specialized knowledge and certifications that cannot be easily or quickly replaced.
Preservation of Going-Concern Value. The Debtor's going-concern value — estimated at a mid-point of approximately $310,000,000 — is inextricably linked to the Debtor's ability to continue operating its business without interruption. Any cessation of operations would immediately and dramatically reduce the value of the Debtor's assets, converting a going-concern enterprise into a collection of idle plants, depreciating equipment, and aging chemical inventory. The difference between a going-concern value of $310,000,000 and a forced liquidation value (estimated by Claridge Advisory Group LLC at approximately $120,000,000 to $150,000,000) represents a potential loss of $160,000,000 to $190,000,000 in value — a loss that would be borne by all of the Debtor's creditors and stakeholders.
For all of the foregoing reasons, the Debtor respectfully submits that its need to use cash collateral is urgent and that the Court should authorize such use on an expedited basis.
VII. APPLICABLE LEGAL STANDARDS
A. Section 363(c)(2) — Consent or Court Authorization
Section 363(c)(2) of the Bankruptcy Code provides that a debtor-in-possession may not use, sell, or lease cash collateral unless:
(A) each entity that has an interest in such cash collateral consents; or
(B) the court, after notice and a hearing, authorizes such use, sale, or lease in accordance with the provisions of this section.
11 U.S.C. § 363(c)(2). Section 363(c)(3) further provides that any hearing under paragraph (2)(B) of this subsection may be a preliminary hearing or may be consolidated with a hearing under subsection (e) of this section, but the court shall act promptly on any request for authorization under paragraph (2)(B). 11 U.S.C. § 363(c)(3). If the court authorizes the use of cash collateral on an interim or preliminary basis, it may condition such authorization on the provision of adequate protection and such other terms as the court deems appropriate.
Here, Prairie State Bank, N.A., as Pre-Petition Agent, has indicated its conditional consent to the Debtor's use of cash collateral, subject to the adequate protection terms described herein. In addition, the Debtor seeks Court authorization as an independent and alternative basis for the use of cash collateral, to ensure that the Debtor has full authority to access its cash collateral even in the event that any question arises regarding the scope or effectiveness of the Pre-Petition Agent's consent.
B. Section 361 — Forms of Adequate Protection
Section 361 of the Bankruptcy Code provides three non-exclusive statutory forms of adequate protection:
(1) Periodic cash payments. The debtor may be required to make periodic cash payments to the secured party to the extent that the stay, use, sale, or lease results in a decrease in the value of the secured party's interest in the property. 11 U.S.C. § 361(1). This form of adequate protection is designed to compensate the secured creditor for the ongoing diminution in the value of its collateral.
(2) Additional or replacement liens. The debtor may provide the secured party with an additional or replacement lien to the extent that the stay, use, sale, or lease results in a decrease in the value of the secured party's interest in the property. 11 U.S.C. § 361(2). Replacement liens on post-petition assets provide the secured creditor with security interests in newly generated collateral to offset the diminution in value of the pre-petition collateral.
(3) Indubitable equivalent. The debtor may grant such other relief as will result in the realization by the secured party of the "indubitable equivalent" of the secured party's interest in the property. 11 U.S.C. § 361(3). The statute expressly provides, however, that adequate protection may not be provided solely through the grant of an administrative expense claim under Section 503(b)(1) of the Bankruptcy Code.
The adequate protection package proposed herein incorporates multiple forms of adequate protection: replacement liens on all post-petition assets and proceeds (Section 361(2)); current-pay interest at non-default contract rates (Section 361(1)); a superpriority administrative expense claim under Section 507(b); and comprehensive monthly reporting obligations. This combination of adequate protection measures is robust and fully satisfies the requirements of Section 361 of the Bankruptcy Code. See In re Ionosphere Clubs, Inc., 98 B.R. 174, 178 (Bankr. S.D.N.Y. 1989) (approving combination of replacement liens, adequate protection payments, and reporting obligations as adequate protection for use of cash collateral); see also In re Ames Dep't Stores, Inc., 115 B.R. 34, 39 (Bankr. S.D.N.Y. 1990) (adequate protection is a flexible concept to be determined on a case-by-case basis).
C. Section 362(d) — Protection Against Stay Relief
The provision of adequate protection to the Pre-Petition Secured Lenders serves the additional important function of protecting the Debtor's estate against any motion by the Pre-Petition Secured Lenders for relief from the automatic stay under Section 362(d)(1) of the Bankruptcy Code for "cause, including the lack of adequate protection of an interest in property of [a secured] party in interest." 11 U.S.C. § 362(d)(1). By providing the comprehensive adequate protection package described in Part V of this Motion, the Debtor addresses the Pre-Petition Secured Lenders' legitimate interests in the preservation and protection of their collateral, thereby eliminating any basis for a stay relief motion premised on a lack of adequate protection. See Timbers of Inwood Forest, 484 U.S. at 370–73 (discussing the interplay between adequate protection under Sections 361 and 362 of the Bankruptcy Code).
D. Case Law Support
Courts have broad discretion under Section 105(a) of the Bankruptcy Code to "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). This includes the authority to fashion adequate protection terms that are tailored to the specific circumstances of the case and that balance the interests of the debtor, the secured creditors, and the estate as a whole. See In re Carbone Cos., 395 B.R. 631, 635–36 (Bankr. N.D. Ohio 2008); In re SW Boston Hotel Venture, LLC, 460 B.R. 38, 46 (Bankr. D. Mass. 2011).
In the context of cash collateral motions filed at the outset of a Chapter 11 case, courts routinely authorize the debtor's use of cash collateral where the debtor demonstrates: (i) an urgent need to access cash collateral to maintain ongoing business operations and preserve the going-concern value of the estate; (ii) that the proposed adequate protection package is sufficient to protect the secured creditors' interests; and (iii) that the use of cash collateral is in the best interests of the estate and its stakeholders. See In re Lyondell Chem. Co., Case No. 09-10023 (Bankr. S.D.N.Y. Jan. 7, 2009) (authorizing use of cash collateral with replacement liens and adequate protection payments); In re General Growth Props., Inc., Case No. 09-11977 (Bankr. S.D.N.Y. Apr. 16, 2009) (same). The Debtor submits that all three conditions are satisfied here.
VIII. RELATIONSHIP TO DIP FINANCING MOTION
This Motion is filed concurrently with the DIP Financing Motion (the "DIP Financing Motion"), Docket No. [__], in which the Debtor seeks authority to enter into a senior secured superpriority debtor-in-possession credit facility in the aggregate principal amount of up to $175,000,000 (the "DIP Facility") with a syndicate of lenders consisting of:
(a) Ironclad Capital Partners LP, as administrative agent and lead lender, with a commitment of $100,000,000, having its principal office at 600 Lexington Avenue, 34th Floor, New York, New York 10022 (Kevin Pratt, Vice President);
(b) Ridgeline Opportunity Fund III LP, as co-lender, with a commitment of $50,000,000; and
(c) Bramblewood Credit Advisors LLC, as co-lender, with a commitment of $25,000,000.
The DIP Facility is governed by a Senior Secured Superpriority Debtor-in-Possession Credit Agreement (the "DIP Credit Agreement"), which is governed by the laws of the State of New York.
The adequate protection terms proposed in this Motion are interrelated with and consistent with the adequate protection provisions of the Proposed Interim Order and the Proposed Final Order on the DIP Financing Motion. The adequate protection package for the Pre-Petition Secured Lenders' consent to the use of cash collateral is incorporated into and forms an integral part of the overall adequate protection framework set forth in the DIP financing arrangements. The Debtor has negotiated the adequate protection terms with Prairie State Bank, N.A., and the DIP Lenders simultaneously to ensure consistency and to avoid duplication or conflict between the cash collateral order and the DIP orders.
The key terms of the DIP Facility are summarized as follows:
Facility Size and Draw Schedule. The DIP Facility provides for aggregate borrowings of up to $175,000,000. The Debtor anticipates an initial interim draw of $80,000,000 upon entry of the Interim DIP Order, which the Debtor expects to be entered on or about May 22, 2025, within five (5) business days of the Petition Date. The remaining $95,000,000 will be available for borrowing upon entry of the Final DIP Order, which the Debtor expects to be entered on or about June 19, 2025, within thirty-five (35) days of the Petition Date.
Interest Rate and Fees. The DIP Facility bears interest at a floating rate equal to SOFR plus 850 basis points per annum, with a SOFR floor of 4.00%, resulting in an effective minimum all-in interest rate of 12.50%. The DIP Credit Agreement provides for a closing fee of $3,500,000 (2.00% of the $175,000,000 total commitment), an exit fee of $1,750,000 (1.00% of the total commitment), and an unused line fee of 0.50% per annum on the undrawn portion of the facility.
Financial Covenants. The DIP Facility includes the following financial covenants: (i) minimum liquidity (defined as unrestricted cash plus undrawn availability under the DIP Facility) of $15,000,000 at all times; (ii) maximum cumulative budget variance of 15% on a rolling four-week basis, tested weekly; and (iii) minimum EBITDA of negative $5,000,000 for any rolling four-week period.
Maturity. The DIP Facility matures on the earliest to occur of: (a) May 15, 2026 (twelve months from the Petition Date); (b) the effective date of a confirmed Chapter 11 plan of reorganization; (c) the consummation of a sale of substantially all of the Debtor's assets pursuant to Section 363 of the Bankruptcy Code; or (d) the occurrence of an Event of Default under the DIP Credit Agreement that has not been cured or waived.
Milestones. The DIP Credit Agreement includes the following case milestones: (i) the Debtor shall file a plan of reorganization or a motion for authority to sell substantially all of its assets pursuant to Section 363 of the Bankruptcy Code by no later than October 12, 2025 (150 days after the Petition Date); and (ii) the Debtor shall obtain confirmation of the plan of reorganization or close the sale of substantially all of its assets by no later than February 8, 2026 (270 days after the Petition Date).
ABL Roll-Up. The DIP Facility contemplates the roll-up of $20,000,000 of pre-petition ABL obligations into the DIP Facility, reducing the outstanding pre-petition ABL balance from $72,300,000 to $52,300,000. The ABL roll-up is conditioned upon entry of the Final DIP Order.
The Debtor respectfully submits that the adequate protection terms proposed in this Motion for the use of cash collateral are identical to the adequate protection package provided to the Pre-Petition Secured Lenders under the DIP financing arrangements, ensuring full consistency across the Debtor's first-day financing motions and avoiding any duplication of adequate protection obligations that could create confusion or administrative burden.
IX. THE DIP BUDGET GOVERNS CASH COLLATERAL USAGE
The Debtor's use of cash collateral shall be governed by the 13-week DIP budget covering the period from May 15, 2025 through August 13, 2025 (the "Budget"), prepared by the Debtor in coordination with Claridge Advisory Group LLC, the Debtor's financial advisor, and filed as Exhibit A to the Proposed Interim DIP Order and cross-referenced as Exhibit A to this Motion.
The Budget provides a detailed, week-by-week projection of the Debtor's anticipated cash receipts and disbursements during the 13-week budget period. A summary of the Budget is as follows:
Reconciliation: $11,800,000 (beginning cash) + $80,000,000 (interim DIP draws) − $35,050,000 (total net cash outflow) = $56,750,000 (ending cash at Week 13). The projected ending cash balance of $56,750,000 exceeds the minimum liquidity covenant of $15,000,000 required under the DIP Credit Agreement by a substantial margin.
Budget Variance Testing. The Debtor's actual disbursements may not exceed budgeted disbursements by more than 15% on a rolling four-week basis, tested wee