MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
To: Claudia Merritt, Responsible Partner, Banking & Finance Ian Blackwood, Billing Partner, Banking & Finance
From: Marcus Leung, Lead Associate, Banking & Finance
Date: February 4, 2025
Re: Internal Budget Estimate — Representation of Nexford Industrial Holdings Inc. in $1,400,000,000 Senior Secured Term Loan B Refinancing and Dividend Recapitalization
Matter No.: 1005-00001
Client/Matter Code: IBL-NIH-2025-031
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I. Executive Summary and Purpose
The purpose of this memorandum is to present a preliminary fee and disbursement budget for Drummond & Fenwick LLP's ("C&H" or the "Firm") representation of Nexford Industrial Holdings Inc. ("Nexford" or the "Borrower") in connection with a $1,400,000,000 senior secured Term Loan B credit facility (the "Term Loan B" or the "Facility"). Crescent Harbor Bank, N.A. will serve as lead left arranger and administrative agent for the Facility (the "Arranger" or "Administrative Agent"). This memorandum is intended for internal use only and is protected by the attorney work product doctrine.
The transaction involves two principal components. First, the refinancing of Nexford's existing $875,000,000 first lien term loan and $190,000,000 revolving credit facility, each currently held by a syndicate of lenders under the administrative agency of Atlas Meridian Bank, N.A. (the "Existing Credit Facility"). Second, an approximately $335,000,000 dividend recapitalization (the "Dividend Recap") to the benefit of Granite Peak Capital Partners, LP, the private equity sponsor of Nexford, through the direct parent entity, Granite Peak NIH Holdings, LLC ("Holdings"). The Dividend Recap will be funded from excess proceeds of the Term Loan B after repayment of all outstanding obligations under the Existing Credit Facility and payment of transaction costs and expenses. The cash remaining after the refinancing and the Dividend Recap will be retained on Nexford's balance sheet for general corporate purposes.
This budget covers all workstreams from engagement opening, which occurred on February 3, 2025, through the anticipated post-closing deadline of April 30, 2025, the date by which recorded mortgages and title insurance policies for the four mortgaged properties must be delivered to the Administrative Agent. The target closing date for the Facility is March 28, 2025 (the "Closing Date"). The post-closing period extends through April 30, 2025 and principally relates to the delivery of recorded mortgage instruments and title insurance policies, UCC-3 termination statement filings to release the existing Atlas Meridian liens, and compilation and delivery of the closing binder.
This budget is preliminary in nature and is subject to revision as the transaction progresses. In particular, the ultimate fee total will depend on the complexity of negotiations with the Arranger's counsel, Whitfield & Gage LLP ("W&G"), led by partner Margaret Ashby, as well as developments in the syndication process, any commercial disputes between the parties that escalate to outside counsel, and any unforeseen legal, regulatory, or diligence issues that may arise during the course of the representation.
It should be noted that this budget does not include the fees and disbursements of local counsel. Hargrove & Whitmore LLP of Chicago, Illinois (Robert Kimura, lead partner) has been engaged as Illinois local counsel for enforceability opinions and mortgage matters in Cook and Winnebago Counties. Briarcliff Legal Group PA of Wilmington, Delaware (Catherine Ellsworth, lead partner) has been engaged as Delaware local counsel for entity opinions relating to the Delaware-organized Loan Parties. The fees and disbursements of each local counsel firm will be billed separately to the client, and estimated ranges for those fees are provided below for budgeting purposes only.
II. Staffing and Billing Rates
A. Team Composition and Hourly Rates
The following table sets forth the anticipated staffing for this engagement, including each timekeeper's role and applicable hourly rate. These rates are consistent with C&H's current standard rate schedule and with the engagement letter executed on February 3, 2025.
The staffing model reflects the Firm's standard approach to leveraged finance transactions of this scale and complexity. Claudia Merritt, as responsible partner, will be actively involved in all principal negotiations with W&G and will provide strategic direction throughout the engagement, including review of the Firm's legal opinions. Ian Blackwood, as billing partner, will maintain oversight of billing matters and will conduct periodic reviews of key deliverables to ensure consistency with client expectations. Sylvia Hartwell will serve as the specialist tax partner and will be primarily responsible for the four tax memoranda described in Workstream 11 below.
At the associate level, Marcus Leung will serve as the primary drafter and negotiator across all workstreams, with particular responsibility for the credit agreement, security and guarantee documentation, the intercreditor agreement, the opinion letter, and the funds flow memorandum. Sophie Tremblay will support diligence activities, organizational document review, UCC filing preparation and processing, subsidiary guarantor documentation, closing mechanics, and post-closing obligations. One or more paralegals will be assigned to provide document management support, signature page compilation and circulation, closing binder preparation, UCC filing processing, and good standing certificate ordering and tracking.
Additional resources may be required depending on the pace and complexity of the transaction. Any material staffing changes or additions will be reflected in updated budget estimates.
B. Estimated Hours by Timekeeper
The following summarizes the anticipated hour ranges for each timekeeper across all workstreams. These ranges reflect the Firm's experience with transactions of comparable size, complexity, and structure, and are based on preliminary assessments of the expected scope of work. Actual hours may vary depending on the factors described in Section VII below.
• Claudia Merritt: Approximately 80–100 hours. Claudia's time will be concentrated in the negotiation of the credit agreement and related documentation, participation in negotiation calls with W&G and Crescent Harbor, strategic direction of the overall engagement, review and execution of the Firm's opinion letters, and communications with the client and sponsor.
• Ian Blackwood: Approximately 10–15 hours. Ian's time will be limited to billing oversight, periodic review of key deliverables, and engagement administration matters as they arise.
• Sylvia Hartwell: Approximately 50–65 hours. Sylvia's time will be concentrated in the preparation of four tax memoranda covering the dividend recapitalization structure and tax consequences, Section 163(j) interest deductibility analysis, withholding tax and FATCA considerations for the lending syndicate, and state and local tax implications of the collateral grants and mortgage recordings.
• Marcus Leung: Approximately 350–420 hours. Marcus will carry the heaviest workload as primary drafter and negotiator. His time will be distributed across all workstreams, with the largest concentrations in credit agreement drafting and negotiation (Workstream 3), security and guarantee documentation (Workstream 4), and due diligence (Workstream 2).
• Sophie Tremblay: Approximately 250–300 hours. Sophie's time will be concentrated in due diligence activities, preparation of organizational and subsidiary guarantor documentation, UCC filing preparation and processing, closing certificate and resolution preparation, closing mechanics, and post-closing deliverables.
• Paralegal Support: Approximately 80–100 hours. Paralegal time will be allocated primarily to document management, signature page compilation and circulation, closing binder preparation and indexing, UCC filing processing and tracking, and good standing certificate ordering and follow-up.
The aggregate hour range across all timekeepers is approximately 820–1,000 hours, which is consistent with C&H's experience on similarly sized and structured leveraged finance refinancing and dividend recapitalization transactions.
III. Budget by Workstream
This section presents a detailed breakdown of the anticipated scope of work, estimated hours, and estimated fees for each of thirteen workstreams that together comprise the full scope of C&H's representation of Nexford in connection with the Term Loan B and Dividend Recap. The workstreams are organized chronologically and functionally, though in practice there will be significant overlap and parallel activity across workstreams, particularly during the period from late February through closing on March 28, 2025.
A. Workstream 1: Term Sheet and Commitment Letter Phase
Scope of Work. This workstream covers the initial phase of the engagement and encompasses the review and mark-up of the initial Crescent Harbor term sheet, which was received on February 5, 2025. C&H will prepare an annotated term sheet identifying key business and legal issues for discussion with the client and, where appropriate, with the Arranger and its counsel. The Firm will prepare a comprehensive issues list for use in negotiations with Crescent Harbor and W&G, and will negotiate the revised term sheet through one or more rounds of revisions. This workstream also includes the review of the commitment letter, which reflects Crescent Harbor's $1,400,000,000 commitment to the Facility, including all market flex provisions contained therein and the allocation of syndication risk. C&H will also review and provide comments on the fee letter, which as currently proposed provides for an arrangement fee of 50 basis points ($7,000,000), an upfront fee of 100 basis points, and original issue discount of 50 basis points ($7,000,000). Upon finalization, C&H will prepare a letter to the client advising on execution and any remaining open issues.
The key economic and structural terms currently under negotiation include, among others:
• Interest rate: SOFR plus a margin of 400 basis points, with a 0.75% SOFR floor;
• Amortization: 1.00% per annum (payable quarterly at 0.25%);
• Financial covenant: springing first lien net leverage ratio covenant of 5.00x, tested only when the revolving credit facility (if established) is drawn in excess of a threshold to be agreed;
• Most favored nation ("MFN") provision: 50 basis points threshold applicable to incremental term loan facilities incurred within 12 months of the Closing Date;
• Change of control provisions: triggered upon any person or group acquiring 35% or more of the voting equity of the Borrower, or upon Holdings ceasing to own 100% of the equity of the Borrower, subject to cross-default provisions linked to the existing Senior Unsecured Notes indenture;
• Excess cash flow sweep: tiered at 50% / 25% / 0% with step-down leverage thresholds at 4.25x and 3.50x first lien net leverage, respectively;
• Voluntary prepayment: at par, subject to a 101 soft call premium for repricing transactions within six months of closing.
Estimated Hours:
Estimated Fees: $55,000–$70,000
This workstream is expected to be substantially completed by mid-February, after which the engagement will shift to the due diligence and credit agreement drafting phases.
B. Workstream 2: Due Diligence and Preliminary Analysis
Scope of Work. This workstream encompasses all due diligence activities conducted by C&H in connection with the representation, beginning with the preparation and issuance of a comprehensive due diligence request list to Nexford's management and continuing through the closing date and, as necessary, into the post-closing period.
The principal components of this workstream include:
Existing Debt Instruments. C&H will conduct a thorough review of the existing Credit Agreement dated June 14, 2019 between Nexford and Atlas Meridian Bank, N.A., as administrative agent, together with all four amendments thereto, including the Fourth Amendment dated September 12, 2024 (which, among other things, waived the prepayment premium otherwise applicable to the contemplated refinancing). This review is critical to confirming that the refinancing may be consummated without triggering any remaining contractual restrictions, prepayment premiums, or notice requirements. C&H will also review the Indenture dated November 8, 2021, governing the $250,000,000 aggregate principal amount of 7.250% Senior Unsecured Notes due 2028 issued by Nexford, with Pinnacle Trust Company serving as indenture trustee (the "Existing Indenture"). This review will focus on negative covenants, change of control provisions, and any restrictions on the incurrence of additional secured indebtedness that might affect the structuring or sizing of the Term Loan B.
Lien and Security Package Analysis. C&H will analyze the existing lien and security package securing the Existing Credit Facility to confirm the scope of collateral currently encumbered, identify any gaps or deficiencies in the existing perfection structure, and assess the steps required to transition the collateral package to the new Facility. This analysis will inform the preparation of the security, guarantee, and pledge documents described in Workstream 4 below.
UCC and IP Lien Searches. C&H will review UCC search results across six jurisdictions — Delaware, Illinois, Pennsylvania, South Carolina, Texas, and Michigan — to confirm the status of existing filings and identify any adverse liens or encumbrances. The Firm will also review intellectual property lien search results obtained from the United States Patent and Trademark Office and the United States Copyright Office.
Real Property and Environmental Diligence. C&H will review title and survey materials for the four mortgaged properties:
• 1400 Industrial Parkway, Schaumburg, Illinois (Cook County) — appraised value $85,000,000;
• 2750 Commerce Drive, Rockford, Illinois (Winnebago County) — appraised value $42,000,000;
• 600 Manufacturers Row, Greenville, South Carolina (Greenville County) — appraised value $38,000,000;
• 9100 Westpark Industrial Boulevard, Houston, Texas (Harris County) — appraised value $28,000,000.
The aggregate appraised value of these properties is approximately $193,000,000. C&H will review Phase I Environmental Site Assessments prepared by Clearwater Environmental Sciences, Inc. for each of the four properties to identify any recognized environmental conditions or other issues that could affect the Arranger's collateral position or give rise to environmental indemnification obligations.
Insurance Program Review. C&H will review the Borrower's insurance program, as administered by Vantage Risk Advisors, LLC, including policies issued by Continental Shield Underwriters, Inc. and Meridian Specialty Insurance Co., to confirm compliance with the insurance covenants anticipated to be included in the credit agreement and to confirm the adequacy of coverage for the collateral.
Additional Diligence. The Firm will conduct a review of Nexford's material contracts, including customer and supplier agreements, license agreements, and intercompany arrangements. C&H will review the Borrower's litigation docket and any contingent liabilities identified by management or disclosed in the Borrower's audited financial statements. Regulatory and compliance diligence will include OFAC, sanctions, and anti-corruption review. The Firm will also review the Canadian subsidiary structure, which includes Nexford Canada Holdings ULC and Nexford Canada Manufacturing, Inc. Because these entities are organized under Canadian law and qualify as controlled foreign corporations, the pledge of equity in Nexford Canada Holdings ULC will be limited to 65% of voting equity (with 100% of non-voting equity), consistent with standard practice for CFC holdco structures.
In connection with this workstream, C&H will prepare a detailed corporate organization chart reflecting the full ownership structure from Granite Peak Capital Fund IV, LP and GP Fund IV Co-Invest, LP at the top of the structure, through Granite Peak NIH Holdings, LLC, through Nexford, and through each of the eleven subsidiary guarantors and the foreign subsidiaries. Sophie Tremblay will maintain an ongoing due diligence status tracker to monitor the receipt and review of all diligence items.
Estimated Hours:
Estimated Fees: $135,000–$175,000
This is a substantial workstream and one that will run in parallel with most other workstreams throughout the life of the engagement. The estimate assumes a reasonably clean diligence picture consistent with what we have seen in initial discussions with Nexford's management. Should material issues arise — for example, undisclosed litigation, previously unidentified environmental conditions, or regulatory compliance deficiencies — additional time and fees would be required.
C. Workstream 3: Credit Agreement Drafting and Negotiation
Scope of Work. This is the core documentation workstream and the single largest component of the anticipated budget. C&H anticipates receiving W&G's first draft of the credit agreement on or around February 24, 2025. Upon receipt, C&H will conduct a comprehensive review of the draft and prepare a detailed issues list (Version 1.0), identifying all provisions requiring revision, clarification, or substantive negotiation. The issues list will be updated through successive versions (anticipated Versions 1.0 through 3.0) as negotiations progress.
C&H anticipates three full rounds of mark-ups: C&H Marked Draft 1, C&H Marked Draft 2, and C&H Marked Draft 3, each accompanied by blacklined comparisons against the preceding draft. Each round of mark-ups will be preceded by internal review and discussion, followed by circulation to and commentary from W&G. Negotiations will be conducted through a combination of written correspondence and calls with W&G, principally with Margaret Ashby and her associate Jonathan Ferris.
The following summarizes the principal provisions anticipated to require the most significant attention and negotiation:
Most Favored Nation (MFN) Provision. The term sheet provides for a 50 basis point MFN threshold applicable to incremental term loan facilities incurred within the first twelve months following closing. C&H will negotiate the scope of the MFN, including carve-outs and sunset provisions, and will seek to include market-standard limitations to preserve the Borrower's flexibility to incur future incremental debt.
Change of Control. The change of control provision as currently proposed is triggered upon any person or group acquiring 35% or more of the voting equity of the Borrower. In addition, the provision requires Holdings (Granite Peak NIH Holdings, LLC) to maintain 100% ownership of the equity of the Borrower. The change of control definition must be reconciled with the cross-default provisions in the Existing Indenture governing the Senior Unsecured Notes. C&H will negotiate the scope of these triggers to protect the Borrower's flexibility while satisfying the requirements of the Arranger and the syndicate.
Excess Cash Flow Sweep Mechanics. The term sheet provides for a tiered mandatory prepayment from excess cash flow at rates of 50%, 25%, and 0%, with step-downs triggered at first lien net leverage ratios of 4.25x and 3.50x, respectively. C&H will negotiate the definition of "Excess Cash Flow," including deductions for capital expenditures, voluntary prepayments, permitted acquisitions, and other customary deductions, as well as the dollar thresholds below which no sweep is required.
Incremental Facility Provisions. The term sheet provides for a free-and-clear incremental basket equal to the greater of $280,000,000 and 100% of LTM Consolidated EBITDA, plus additional capacity available upon satisfaction of a 4.50x first lien net leverage ratio incurrence test. C&H will negotiate the terms and conditions applicable to incremental facilities, including MFN protections, maturity and weighted average life requirements, and "most restrictive covenant" provisions.
Restricted Payment Baskets. The credit agreement is expected to include a $25,000,000 annual general restricted payment basket, a builder basket with a $50,000,000 starter amount plus 50% of cumulative consolidated net income, and an unlimited restricted payment capacity at or below 3.75x total net leverage. These provisions are critical to the Sponsor's ability to receive future distributions and will require careful negotiation.
Permitted Indebtedness Carve-Outs. C&H will review and negotiate the full schedule of permitted indebtedness carve-outs, including carve-outs for capital leases, purchase money indebtedness, intercompany indebtedness, letters of credit, and hedging obligations.
EBITDA Add-Back Definitions. The definition of "Consolidated EBITDA" is expected to permit up to $28,000,000 in add-backs for projected cost savings, synergies, and non-recurring charges. C&H will negotiate the scope and limitations of permitted add-backs, including caps, time limitations, and certification requirements.
Mandatory Prepayment Provisions. In addition to the excess cash flow sweep discussed above, C&H will negotiate mandatory prepayment provisions relating to asset dispositions, insurance and condemnation proceeds, and the incurrence of debt not otherwise permitted under the credit agreement, including step-down percentages and reinvestment rights.
Voluntary Prepayment Mechanics. Voluntary prepayments are at par, subject to a 101 soft call premium applicable to repricing transactions consummated within six months of closing. C&H will negotiate the definition of "repricing transaction" and any applicable exceptions.
Following completion of all negotiation rounds, C&H will prepare a near-final draft of the credit agreement, targeted for circulation by March 22, 2025, and will coordinate with W&G to produce the execution version for signing on the Closing Date of March 28, 2025. The credit agreement will be governed by New York law.
Estimated Hours:
Estimated Fees: $210,000–$260,000
This is the largest single workstream and the most sensitive to negotiation complexity. The estimated fee range assumes three rounds of mark-ups and a moderate level of commercial and legal debate on the key provisions described above. If additional rounds of mark-ups are required, or if significant commercial disputes arise that require extended partner involvement and client coordination, the budget for this workstream may increase materially. We will provide updated estimates as negotiations progress.
D. Workstream 4: Security, Guarantee, and Pledge Documents
Scope of Work. This workstream covers the preparation, negotiation, and finalization of all security, guarantee, and pledge documentation required to establish the collateral package securing the Term Loan B. The principal documents to be prepared or reviewed include:
Guarantee Agreement. C&H will draft the Guarantee Agreement, which will be entered into by the Holdings Guarantor (Granite Peak NIH Holdings, LLC) and the eleven Subsidiary Guarantors: Nexford Products Corporation ("NPC"), Nexford Engineered Solutions, Inc. ("NES"), Nexford Component Supply & Trading Co. ("NCST"), Nexford Manufacturing Services, LLC ("NMS"), Nexford Properties LLC ("NP LLC"), Nexford International Holdings, Inc. ("NIH Intl"), Clearfield Industries, Inc. ("Clearfield"), Summit Fabrication Co. ("Summit"), Ridgepoint Systems LLC ("Ridgepoint"), and Lakeshore Distribution, Inc. ("Lakeshore"). The guarantee will be a full, unconditional, and irrevocable guaranty of all obligations under the credit agreement and related loan documents.
Security Agreement. C&H will draft a comprehensive Security Agreement granting the Administrative Agent (as Collateral Agent) a first-priority security interest in substantially all personal property of the Borrower and each Guarantor, including accounts receivable, inventory, equipment, intellectual property, deposit accounts, securities accounts, general intangibles, material intercompany notes, and all proceeds thereof.
Pledge Agreements. C&H will prepare the following pledge agreements:
• Holdings Pledge Agreement: Holdings pledging 100% of the equity interests in Nexford to the Collateral Agent;
• Borrower Pledge Agreement: Nexford pledging 100% of the equity interests in each of its direct domestic subsidiaries;
• Subsidiary Pledge Agreements: Each subsidiary guarantor pledging 100% of the equity interests in its respective direct subsidiaries, as applicable;
• CFC Holdco Limited Pledge Agreement: Nexford International Holdings, Inc. pledging 65% of the voting equity and 100% of the non-voting equity in Nexford Canada Holdings ULC to the Collateral Agent, consistent with the customary limitation on pledges of CFC stock.
intellectual Property Security Agreement. C&H will prepare a separate IP Security Agreement granting the Collateral Agent a security interest in all registered patents, trademarks, and copyrights of the Borrower and the Guarantors, in a form suitable for recording with the USPTO and the U.S. Copyright Office.
Deposit Account Control Agreements. C&H will prepare or review Deposit Account Control Agreements ("DACAs") for the Borrower's deposit accounts, including accounts at Crescent Harbor Bank (as the Administrative Agent's depository institution) and operating accounts at Redstone National Bank (accounts ending in -4471, -4472, and -6633). These DACAs will provide the Collateral Agent with "control" over the deposit accounts for purposes of perfection under Article 9 of the UCC.
Securities Account Control Agreements. C&H will prepare or review Securities Account Control Agreements covering any securities accounts maintained by the Borrower or the Guarantors.
Intercompany Note. C&H will prepare or review the form of intercompany note to be issued by subsidiaries of the Borrower and pledged to the Collateral Agent as additional collateral.
C&H anticipates circulating first drafts of the security, guarantee, and pledge documents by March 10, 2025, with revised drafts to be circulated by March 17, 2025, and execution versions prepared for signing on March 28, 2025. Negotiations with W&G will focus on collateral descriptions, excluded asset definitions (including motor vehicles with a value of less than $250,000 per vehicle, letter of credit rights with a value of less than $1,000,000, commercial tort claims with a value of less than $2,500,000, and other assets for which the cost of perfection would be excessive relative to the value of the security interest obtained), and perfection mechanics.
Estimated Hours:
Estimated Fees: $170,000–$210,000
E. Workstream 5: UCC Filings and Lien Perfection
Scope of Work. This workstream covers the preparation and filing of all Uniform Commercial Code financing statements required to perfect the Collateral Agent's security interests in the personal property collateral of the Borrower and the Guarantors. C&H will prepare and file thirteen UCC-1 Financing Statements, one for each Loan Party, across six jurisdictions as follows:
• Delaware Secretary of State: Nexford Industrial Holdings Inc., Granite Peak NIH Holdings, LLC, Nexford Products Corporation, Nexford Engineered Solutions, Inc., Nexford Component Supply & Trading Co., Nexford Properties LLC, and Nexford International Holdings, Inc. (seven filings);
• Illinois Secretary of State: Nexford Manufacturing Services, LLC (one filing);
• Pennsylvania Department of State: Clearfield Industries, Inc. (one filing);
• South Carolina Secretary of State: Summit Fabrication Co. (one filing);
• Texas Secretary of State: Ridgepoint Systems LLC (one filing);
• Michigan Department of State: Lakeshore Distribution, Inc. (one filing).
In addition, following closing, C&H will prepare and file UCC-3 Termination Statements to release all liens of Atlas Meridian Bank, N.A. and its syndicate against the Loan Parties. These termination statements will be filed on or about March 31, 2025 in Delaware, Illinois, and Pennsylvania, and in any other jurisdiction in which Atlas Meridian UCC-1 filings are identified during the course of diligence. Filing will be coordinated with the receipt and confirmation of the payoff letter and lien release authorization from Atlas Meridian.
Filing fees and service company charges associated with the UCC filings are estimated separately in the disbursements section below (Section V).
Estimated Hours:
Estimated Fees: $40,000–$55,000
F. Workstream 6: Intercreditor Agreement
Scope of Work. This workstream covers the negotiation and finalization of an intercreditor agreement governing the relative rights and priorities of the holders of the Term Loan B (represented by the Collateral Agent) and the holders of the $250,000,000 Senior Unsecured Notes (represented by Pinnacle Trust Company, as indenture trustee). The intercreditor framework will establish the priority of claims, enforcement standstill provisions, and the proceeds waterfall applicable upon any enforcement of shared collateral or in the context of any insolvency proceeding.
C&H will review and mark up the first draft of the intercreditor agreement, which W&G is expected to circulate on or about March 12, 2025. C&H will prepare an internal analysis memorandum identifying key issues and recommended negotiation positions. The principal areas of negotiation are anticipated to include the scope and duration of enforcement standstills applicable to the unsecured noteholders, the allocation of proceeds from collateral dispositions and insurance recoveries, the rights of the unsecured noteholders in bankruptcy proceedings (including adequate protection and DIP financing), and the scope of any "buy-out" or "purchase option" provisions.
The near-final draft of the intercreditor agreement is targeted for March 23, 2025, with the execution version prepared for signing on March 28, 2025.
The credit agreement will also include framework provisions addressing the potential future incurrence of second lien debt and the corresponding need for a first lien / second lien intercreditor agreement. However, no second lien debt is currently anticipated, and accordingly, no separate intercreditor agreement drafting is expected in connection with this transaction for that purpose.
Estimated Hours:
Estimated Fees: $40,000–$50,000
G. Workstream 7: Mortgage and Real Property Collateral
Scope of Work. This workstream covers the preparation, negotiation, and post-closing recording of mortgage instruments for the four real properties included in the collateral package. For each property, C&H will prepare a Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing (each, a "Mortgage"), in the form required by the applicable state and county. The four mortgaged properties are:
1. 1400 Industrial Parkway, Schaumburg, Illinois (Cook County) — appraised value $85,000,000;
2. 2750 Commerce Drive, Rockford, Illinois (Winnebago County) — appraised value $42,000,000;
3. 600 Manufacturers Row, Greenville, South Carolina (Greenville County) — appraised value $38,000,000;
4. 9100 Westpark Industrial Boulevard, Houston, Texas (Harris County) — appraised value $28,000,000.
C&H will coordinate with Hargrove & Whitmore LLP (Robert Kimura) on the preparation of the Illinois mortgage forms for the Schaumburg and Rockford properties. Separate local counsel engagement for the South Carolina and Texas mortgage forms may be required depending on the specific requirements of Greenville County and Harris County, respectively, and the extent to which W&G provides initial drafts of these forms.
The mortgages are a post-closing deliverable and are due to be delivered in recorded form to the Administrative Agent on or before April 30, 2025. C&H will prepare recording cover letters and filing instructions for each property and will coordinate the mortgage recording process with local counsel and the recording agents.
C&H will also review the title insurance commitments issued by Landmark Title Assurance Company for each of the four properties, including all standard and special exceptions, and will work with the title company to obtain any required endorsements and to clear any title objections identified during the review process.
The analysis of mortgage recording taxes applicable to each property is included in the Tax Analysis and Structuring workstream (Workstream 11) below and is being handled by Sylvia Hartwell.
Estimated Hours:
Estimated Fees: $40,000–$55,000
H. Workstream 8: Legal Opinions
Scope of Work. C&H will prepare and deliver the following legal opinions in connection with the closing of the Facility:
C&H Opinion Letter. C&H will deliver to Crescent Harbor Bank, N.A., as Administrative Agent, an opinion letter addressing: (i) New York law enforceability of the credit agreement and related loan documents; (ii) no conflicts with applicable New York law or specified organizational documents; and (iii) due authorization, execution, and delivery by the Borrower and the Guarantors of the loan documents.
C&H UCC Perfection Opinion. C&H will deliver a separate opinion addressing the perfection of the Collateral Agent's security interests under the New York Uniform Commercial Code, including the effectiveness of UCC-1 financing statements filed in the applicable jurisdictions.
In addition, C&H will coordinate with and review the opinions to be delivered by local counsel:
Hargrove & Whitmore LLP. Illinois enforceability opinion and Illinois UCC perfection opinion, covering the Illinois-organized Loan Parties and the mortgaged properties in Cook and Winnebago Counties. Robert Kimura will serve as the lead opinion partner.
Briarcliff Legal Group PA. Delaware entity opinions covering the Delaware-organized Loan Parties, including opinions as to due organization, good standing, and authority. Catherine Ellsworth will serve as the lead opinion partner.
C&H will prepare an internal opinion assumptions and limitations analysis and will coordinate with the Borrower's management on the preparation and execution of the opinion back-up certificate. Correspondence to local counsel regarding the required form and scope of their respective opinions will be circulated on or about March 12, 2025. A preliminary draft of C&H's opinion will be circulated internally and to local counsel by March 20, 2025. Final opinions will be delivered at closing on March 28, 2025.
Estimated Hours:
Estimated Fees: $55,000–$70,000
I. Workstream 9: Closing Certificates, Resolutions, and Officer Deliverables
Scope of Work. This workstream covers the preparation of all closing certificates, board and manager resolutions, and officer deliverables required as conditions precedent to the closing of the Facility. The principal documents to be prepared include:
• Closing Certificate of the Borrower: A certificate delivered by the Borrower at closing confirming satisfaction of all conditions precedent to the initial borrowing under the Facility.
• Officer's Certificate: A certificate delivered by Michelle Kaplan, Chief Financial Officer of Nexford, confirming the accuracy of all representations and warranties and the absence of any default or event of default under the credit agreement as of the Closing Date.
• Secretary's Certificate — Borrower: A certificate delivered by David Engstrom, General Counsel and Corporate Secretary of Nexford, certifying incumbency, attaching certified copies of the Borrower's organizational documents and board resolutions authorizing the transaction.
• Secretary's Certificate — Holdings: A corresponding certificate for Granite Peak NIH Holdings, LLC, certifying incumbency, organizational documents, and manager/member resolutions.
• Secretary's Certificates — Subsidiary Guarantors: Corresponding certificates for each of the eleven Subsidiary Guarantors.
• Solvency Certificate: A certificate delivered by Michelle Kaplan, Chief Financial Officer of Nexford, certifying the solvency of the Borrower and its subsidiaries on a consolidated basis after giving effect to the transactions contemplated by the credit agreement, including the Dividend Recap.
• Pro Forma Compliance Certificate: A certificate demonstrating pro forma compliance with the financial covenant under the credit agreement. Based on preliminary projections, pro forma first lien net leverage is approximately 3.38x and pro forma total net leverage is approximately 4.03x, each well below the 5.00x covenant level.
• Use of Proceeds Compliance Certificate: A certificate confirming compliance with sanctions, OFAC, and anti-corruption requirements in connection with the use of proceeds of the Term Loan B.
• Good Standing Certificates: Good standing certificates from the relevant Secretaries of State for all Loan Parties, ordered within five business days of closing. C&H will also order certified copies of organizational documents from the relevant Secretaries of State.
In addition, C&H will prepare or review the following corporate authorizations:
• Board Resolutions of the Borrower, adopted January 13, 2025, and to be certified as of March 28, 2025;
• Manager/Member Resolutions of Holdings, adopted January 13, 2025, and to be certified as of March 28, 2025;
• Board Resolutions (or Manager/Member Resolutions, as applicable) of each Subsidiary Guarantor, adopted or to be adopted consistent with the timeline above.
Estimated Hours:
Estimated Fees: $45,000–$60,000
J. Workstream 10: Funds Flow and Closing Mechanics
Scope of Work. This workstream covers the preparation and finalization of all documents and processes related to the mechanics of closing the Facility and the disbursement of proceeds. The principal activities include:
• Funds Flow Memorandum: C&H will prepare a comprehensive funds flow memorandum detailing the sources and uses of the $1,400,000,000 in proceeds. A draft of the funds flow memorandum will be circulated on or about March 22, 2025, with the execution version finalized by March 27, 2025. The preliminary sources and uses are as follows:
• Wire Transfer Instructions: C&H will compile and verify all wire transfer instructions, including instructions for Nexford's accounts, the Atlas Meridian payoff wire of $879,375,000, and the dividend distribution wire of approximately $335,000,000 to Granite Peak NIH Holdings, LLC.
• Payoff Letter: C&H will review and comment on the payoff letter to be issued by Atlas Meridian Bank, N.A. (Sandra Vickers, lead contact), which will set forth the outstanding principal, accrued interest, fees, and any other amounts required to discharge the Existing Credit Facility in full on the Closing Date.
• Lien Release Authorization Letter: C&H will prepare a lien release authorization letter for execution by Atlas Meridian, authorizing the release of all liens securing the Existing Credit Facility upon receipt of the payoff amount.
• Closing Checklist and Conditions Precedent Tracker: C&H will prepare and maintain a comprehensive closing checklist and conditions precedent tracker, identifying all deliverables required for closing and tracking their status through completion.
• Closing Agenda: C&H will prepare a closing agenda (draft March 20, 2025; final March 27, 2025) setting forth the sequence of closing deliverables and the order of funding.
• Signature Page Compilation and Circulation: C&H will compile and circulate signature pages for all loan documents for execution by all parties, with circulation targeted for March 25, 2025.
• Bring-Down Confirmations: C&H will coordinate bring-down good standing certificates and bring-down lien search confirmations immediately prior to closing (targeted for March 27, 2025) to confirm the continued accuracy of representations made at closing.
Estimated Hours:
Estimated Fees: $45,000–$60,000
K. Workstream 11: Tax Analysis and Structuring
Scope of Work. This workstream will be primarily handled by Sylvia Hartwell, Specialist Partner, Tax. The scope of tax analysis in connection with this transaction is significant given the combination of the refinancing, the Dividend Recap, the multi-state collateral package, and the presence of foreign subsidiaries in the corporate structure. Sylvia will prepare four tax memoranda as described below, each of which will be shared with the deal team and, as appropriate, with the client and its internal tax advisors. Nexford's fiscal year ends on December 31, and its state of tax residence is Illinois.
Memorandum 1: Dividend Recapitalization Structure and Tax Consequences. This memorandum will analyze the tax consequences of the approximately $335,000,000 distribution from Nexford through Holdings to Granite Peak Fund IV and GP Fund IV Co-Invest, LP. The analysis will include an earnings and profits (E&P) review to determine the extent to which the distribution is treated as a dividend for federal income tax purposes, and the characterization of any portion of the distribution in excess of E&P as a return of capital or capital gain.
Memorandum 2: Deductibility of Interest on Term Loan B — IRC Section 163(j) Analysis. This memorandum will analyze the deductibility of interest on the Term Loan B under the business interest expense limitation of IRC Section 163(j), as modified by the Tax Cuts and Jobs Act of 2017. The 163(j) limitation restricts the deduction of business interest expense to 30% of adjusted taxable income ("ATI"). Based on preliminary projections, the pro forma annual interest expense on the Term Loan B and the existing Senior Unsecured Notes is approximately $117.7 million, and Nexford's Adjusted EBITDA is approximately $385 million. The memorandum will estimate the amount of any disallowed interest expense carryforward and the impact on Nexford's effective tax rate.
Memorandum 3: Withholding Tax Considerations for Lenders. This memorandum will address FATCA compliance requirements and treaty-based withholding tax analysis applicable to non-U.S. participants in the lending syndicate. The analysis will support the preparation of appropriate W-8/W-9 collection procedures and will be coordinated with the credit agreement's tax indemnity and gross-up provisions.
Memorandum 4: State and Local Tax Implications of Collateral Grants and Mortgage Recording. This memorandum will analyze the mortgage recording taxes applicable to the recording of the four mortgages in Cook County and Winnebago County, Illinois; Greenville County, South Carolina; and Harris County, Texas. The memorandum will also address any intangible taxes or documentary stamp taxes applicable to the granting of security interests in personal property in the relevant jurisdictions.
In addition, Sophie Tremblay will coordinate with Sylvia Hartwell on the preparation of a W-8/W-9 collection memorandum and checklist to be distributed to all Loan Parties, ensuring timely collection of the required tax forms prior to closing.
Estimated Hours:
Estimated Fees: $90,000–$115,000
L. Workstream 12: Client and Counterparty Communications
Scope of Work. This workstream captures the substantial volume of communications required throughout the engagement with the client, the Sponsor, the Arranger, and their respective counsel. While communications activities are inherent in each of the other workstreams, this workstream captures the incremental time dedicated to coordination, status calls, and strategic discussions that do not fit neatly within any single documentation or diligence workstream.
The principal lines of communication include:
• Nexford Management: Ongoing correspondence and calls with David Engstrom (General Counsel), Michelle Kaplan (Chief Financial Officer), and Priya Mehta (Vice President, Treasury) regarding transaction status, document review, and closing logistics.
• Granite Peak Capital Partners: Coordination with the Sponsor's deal team, principally Ryan Ostrowski (Principal), and the Sponsor's counsel, Patricia Voss of Kellner Brandt & Associates LLP, regarding the Dividend Recap structure, credit agreement provisions affecting the Sponsor's interests (particularly restricted payment baskets and change of control), and closing mechanics.
• Crescent Harbor Bank: Communications with the Arranger's team, principally Elaine Prescott and Thomas Nakamura, regarding syndication developments, conditions precedent, and closing logistics.
• Whitfield & Gage LLP: Ongoing negotiation correspondence and calls with Margaret Ashby and Jonathan Ferris regarding all documentation matters.
• Nexford Board: Preparation and delivery of a transaction summary and closing confirmation letter to the Board of Directors of Nexford, summarizing the key terms of the Facility and confirming the consummation of the closing.
Estimated Hours:
Estimated Fees: $30,000–$40,000
M. Workstream 13: Post-Closing
Scope of Work. This workstream covers all activities occurring after the Closing Date of March 28, 2025, through the post-closing deadline of April 30, 2025. The principal post-closing activities include:
• Post-Closing Obligations Letter: C&H will prepare and deliver to Nexford a letter identifying all post-closing obligations under the credit agreement and related loan documents, together with the applicable deadlines for each obligation. This letter is targeted for delivery on March 31, 2025.
• Post-Closing Checklist and Tracker: Sophie Tremblay will maintain a post-closing checklist and tracker to monitor the status of all outstanding post-closing items.
• UCC-3 Termination Statement Filings: C&H will prepare and file UCC-3 Termination Statements to release all liens of Atlas Meridian Bank, N.A. in Delaware, Illinois, Pennsylvania, and any other jurisdictions in which Atlas Meridian filings are identified. These filings are targeted for March 31, 2025.
• Mortgage Recording: C&H will prepare mortgage recording cover letters and filing instructions for each of the four mortgaged properties and will coordinate with local counsel and recording agents to ensure timely recording. Title insurance commitment review by Landmark Title Assurance Company will continue during the post-closing period as policies are issued.
• Post-Closing Certificate: C&H will prepare a post-closing certificate for delivery to the Administrative Agent confirming the delivery of recorded mortgages and title insurance policies, due on or before April 30, 2025.
• Closing Binder: C&H will compile a comprehensive closing binder, including an index of all executed transaction documents, and will distribute copies to the client, the Administrative Agent, and the Firm's files.
• Final Transaction Summary Memorandum: C&H will prepare a final transaction summary memorandum for the client's files, summarizing the terms and structure of the Facility as consummated.
Estimated Hours:
Estimated Fees: $30,000–$40,000
IV. Budget Summary Table
The following table summarizes the estimated professional fees for each of the thirteen workstreams described above:
The midpoint of the estimated fee range is approximately $1,122,500, which we believe represents a reasonable estimate for a transaction of this size and complexity. The two largest workstreams — Credit Agreement Drafting and Negotiation (Workstream 3) and Security/Guarantee/Pledge Documents (Workstream 4) — together account for approximately 37%–39% of the total estimated fees, consistent with our experience on comparable transactions.
V. Estimated Disbursements