NOVATION COMPANIES, INC.: going-concern / distress — Novation Companies files Chapter 11; prepackaged plan cancels all existing stock

NOVATION COMPANIES, INC.

Debtors filed Chapter 11 on Aug 13, 2023; pre-packaged plan filed same day under RSA with Plan Sponsors.
Plan will cancel all outstanding common and preferred stock; Plan Sponsors to receive preferred stock and 47.5% of new common equity.
DIP facility of up to $1.77M at 13% interest plus 6% facility fee; matures 90 days from petition date or effective date.
Company expects stockholders to experience a complete loss on their investment.
Plan Sponsors to contribute $350,000 upon emergence and fund $625,000 in annual payments; annual admin fee of $565,000.

item 1.01 item 1.03 item 2.03 item 8.01 item 9.01

Key facts

Extracted from this filing and checked against the source text.

Debt Financings SEC 8-K Item 2.03/2.04 confidence 0.9

NOVATION COMPANIES, INC. incurred term loan of up to $1,770,000 with Plan Sponsors at non-default interest rate of 13% maturing the earlier of 90 days after the Petition Date or the Effective Date.

Instrument: term loan
Principal: up to $1,770,000
Counterparty: Plan Sponsors
Rate: non-default interest rate of 13%
Maturity: the earlier of 90 days after the Petition Date or the Effective Date
Event: incurrence

Exact text from the filing

On August 4, 2023, the Debtors and the Plan Sponsors entered into a Debtor-In-Possession Loan and Security Agreement (the “DIP Agreement”), pursuant to which, subject to the approval of the Bankruptcy Court, the Plan Sponsors will fund a debtor in possession term loan facility (the “DIP Facility”), expected to be in an aggregate principal amount of up to $1,770,000 and subject to a non-default interest rate of 13%, a default interest rate of an additional 3%, a 6% facility fee to be deducted from the proceeds of the DIP Facility, and a maturity date that is the earlier of 90 days after the Petition Date or the Effective Date, to be used to satisfy operational costs, other costs associated with administering the Chapter 11 Cases and the Allowed SAP Claims.

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Distress & Bankruptcy SEC 8-K Item 1.03 confidence 0.9

NOVATION COMPANIES, INC. entered chapter 11 in United States Bankruptcy Court for the District of Delaware (petition 2023-08-13).

Proceeding: chapter 11
Court: United States Bankruptcy Court for the District of Delaware
Petition: 2023-08-13

Exact text from the filing

On August 13, 2023 (the “Petition Date”), Novation Companies, Inc. (the “Company”) and its wholly-owned subsidiaries, Novation Holding, Inc., Healthcare Staffing, Inc., and NovaStar Mortgage LLC, (together with the Company, the “Debtors”), filed voluntary petitions (the “Chapter 11 Cases”) for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”).

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Source: SEC EDGAR

accession 0001193805-23-001191

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