Exela Inter-Lender Ch. 11 DIP Fight Still Ongoing

DocuData Solutions, a bankrupt subsidiary of Exela Technologies Inc., has reached a significant settlement with both secured noteholders and junior creditors, paving the way for its exit from Chapter 11 bankruptcy.

The agreement was achieved after negotiations with a committee representing unsecured creditors, a group of senior secured noteholders, and Exela’s chairman, Par Chadha. The terms were disclosed in a notice filed with the U.S. Bankruptcy Court for the Southern District of Texas.

Key Terms of the Deal

• General unsecured creditors will share a $4.75 million cash pool.

• Payments to these creditors will be made in three installments over a 27-month period.

• The settlement also provides for a 4% annual interest on these payments1.

_{Source: Bloomberg Law}

Background on Bankruptcy and DIP Financing

Exela Technologies, a global business automation provider, filed for Chapter 11 bankruptcy in early March 2025 as part of a creditor-supported plan to swap approximately $1.2 billion in secured notes for reorganized equity. 

The company’s restructuring efforts are driven by severe liquidity constraints and high leverage, with Exela holding only $0.1 million in cash at the time of filing—insufficient to cover ongoing operations or bankruptcy-related costs.

To stabilize operations during bankruptcy, Exela secured a $185 million debtor-in-possession (DIP) loan. This financing is critical for maintaining business continuity and supporting the company’s accelerated restructuring process.

Nature of the Inter-Lender DIP Fight

Despite resolving objections from the unsecured creditors committee regarding the final approval of the DIP loan, Exela continues to face a dispute among its secured lenders over the terms and structure of the DIP facility. 

The conflict centers on the allocation of collateral and repayment priorities between different creditor groups, specifically those holding the April 2026 Notes and the lenders under the Blue Torch Facility.

• The Ad Hoc April 2026 Group, representing about 73.7% of unaffiliated bondholders, is providing the majority of the DIP financing, which will convert into a $245 million exit facility upon Exela’s emergence from bankruptcy.

• The Blue Torch Facility, with $38.5 million outstanding, is also secured by substantially all of Exela’s personal property and fixtures.

• The dispute involves how the new DIP financing and the eventual exit facility affect the rights and recoveries of these secured lender groups, particularly regarding collateral priority and the treatment of rolled-up debt.

Negotiations are ongoing among the secured creditor groups to resolve the inter-lender dispute, but as of April 21, 2025, no final agreement had been reached regarding the DIP facility’s structure and the allocation of recoveries.

Implications and Path Forward

The outcome of the inter-lender DIP fight will shape the final terms of Exela’s restructuring, including how different classes of creditors are repaid and the company’s post-bankruptcy capital structure. The bankruptcy court in Texas is expected to play a key role in adjudicating these disputes if a consensual resolution is not reached.

Summary Table: Key Parties and Issues

Exela’s restructuring remains in flux as the inter-lender DIP dispute continues, with the outcome likely to influence the company’s ability to emerge efficiently from Chapter 11 and the recoveries for each creditor class.

_{Source: bondoro.com, casedocs.omniagentsolutions.com}

Analysis and Key Metrics for Alternative Business Lenders

Exela Technologies’ $185 million DIP financing carries a 12% base interest rate (escalating to 14% upon default)\, with a 5% backstop fee and 5% upfront fee paid in-kind at closing. 

_{Source: marketscreener.com}

This pricing reflects moderate risk compensation compared to 2025’s aggressive DIP market, where facilities like Ligado’s 17.5% PIK/15.5% cash rates and Jackson Hospital’s 14% base (19% default) set higher benchmarks.

Key Pricing vs. Market Norms

_{Source: High-cost DIP loans and unique structures shape bankruptcy financing in early 2025}

The $245 million exit facility converts the DIP into a $60 million new money term loan and $105 million rolled-up April 2026 Note obligations, with repayment priority over Blue Torch’s $38.5 million secured claim. This structure creates inherent tension: Blue Torch holds first-priority liens on substantially all personal property/fixtures, while the Ad Hoc Group’s exit facility claims priming rights via bankruptcy court approval.

Collateral Specifics Driving Dispute

• Blue Torch’s collateral: All personal property/fixtures (exact assets unspecified)

• Ad Hoc Group’s DIP/exit collateral: Likely senior liens on same assets via priming maneuver

• Unresolved issue: Whether Blue Torch’s prepetition security agreements allow subordination to new DIP liens

The inter-lender conflict stems from recovery hierarchy:

1. The Ad Hoc Group (73.7% bondholders) seeks to maximize recovery via DIP roll-up and exit facility seniority

2. Blue Torch aims to protect its $38.5 million claim’s first-lien position against dilution

Texas bankruptcy courts generally favor debtor-in-possession financing that enables restructuring continuity, but Exela’s accelerated timeline (targeting emergence within 40 days) increases execution risk. With only $0.1 million cash at filing, the DIP’s success hinges on maintaining operations while adjudicating lien priorities – a common pressure point in tech bankruptcies where IP/assets are critical but valuation-dependent.

For lenders, the key risk/reward calculus involves:

• Upside: 17% implied IRR (12% cash + 5% PIK fees) with exit facility equity conversion optionality

• Downside: Collateral coverage of just $0.21 per $1 loaned ($38.5M Blue Torch claim vs. $185M DIP) if asset sales underperform

This structure mirrors 2024’s Revlon and 24-Hour Fitness DIPs in balancing roll-up incentives with senior lender protections, but with tighter timelines amplifying refinancing risk

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