During its Chapter 11 case, it turned down a DIP loan and fought successfully for many months to operate just using cash collateral. It eventually made a deal with its prepetition bank group for a DIP loan with appropriate terms.

When Metals USA ran an auction among banks for the opportunity to provide working capital for exit financing, its prepetition bank group competed for and won that opportunity. With that as an anchor, Metals USA proposed and confirmed a Chapter 11 plan that converted all of its unsecured bond debt to equity only, so that it emerged from Chapter 11 with the best balance sheet in its industry.

To accomplish this, Metals USA dealt successfully with difficult judgment calls about (i) whether it would take a DIP loan with onerous terms or fight to use cash collateral, (ii) whether its old equity was out of the money, and (iii) whether it would insist on a post-confirmation balance sheet that converted debt to equity only, or give in to the request for post confirmation debt with tight terms.

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