A federal bankruptcy court judge in Delaware has agreed to allow Reverse Mortgage Investment Trust Inc. (RMIT) to obtain additional financing that could total as much as $124.5 million.
Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware signed an order Thursday approving the debtor-in-possession financing from BNGL Holdings Inc. and Leadenhall Capital Partners LLP. The order allows for an immediate $34.5 million to meet the company’s obligations to consumers, plus another $10 million once certain obligations are met. It also authorized another $80 million in financing from Longbridge Financial LLC, again when certain conditions are met.
Thursday’s order follows the judge’s approval earlier this week of $13 million in debtor-in-possession financing from BNGL Holdings.
Debtor-in-possession financing is a short-term loan used by a business to bridge the gap between when it receives payment from its customers and when it needs to pay creditors.
In its petition for the second debtor-in-possession (DIP) financing request approved Thursday, RMIT said it has a “critical need” for the financing to, among other things, pay the costs of its bankruptcy case, continue operating its business, make lease and other contracted payments, and pay expenses.
“The debtors do not have sufficient available sources of working capital and financing to operate their businesses or maintain their properties in the ordinary course of business without access to the DIP facilities and the authorized use of cash collateral, as applicable,” the petition states.
Bloomfield, N.J.-based RMIT and its affiliates, including Reverse Mortgage Funding LLC (RMF), filed a petition last month for Chapter 11 bankruptcy protection, which protects a company from creditors while it reorganizes its finances. The judge consolidated the bankruptcy case under RMIT’s name.
The filing came one day after RMF laid off 80% of its staff, or about 400 people, and the company and its affiliates now face a class action lawsuit over that reduction in force.
A lawsuit filed Dec. 4 in the Delaware bankruptcy court on behalf of an employee who was among the 400 laid off accuses the companies of violating the federal Worker Adjustment and Retraining Notification (WARN) Act and related state laws in New Jersey, New York and California.
The WARN Act requires an employer to provide at least 60-days advance notice of a shutdown or mass layoff. RMF’s employees appear to have been laid off the same day RMF filed its WARN notices in the three states.
The plaintiff, New York resident Melissa Giglio, states that she was employed by RMF “as sales support/business development” from 2014 until last month. The lawsuit, which seeks class action status, includes in the class Giglio and “approximately 400 other employees” who were terminated on Nov. 29. The complaint states that none of the laid off workers received written notice of their terminations before Nov. 29.
The lawsuit seeks certification of the class, as well as the payment of unpaid wages, salary, commissions, bonuses, accrued holiday and vacation pay, pension and 401(k) contributions and ERISA benefits for 60 days, plus “severance pay equal to one week of pay for each full year of employment.”