Internet service provider Starry Group Holdings (NYSE:STRY) and its affiliates today announced that the company has started voluntary chapter 11 bankruptcy proceedings and has entered into a Restructuring Support Agreement (“RSA”) with lenders holding its debt, almost a year after completing its merger with FirstMark Horizon Acquisition Corp.

The internet service provider continues to operate its business as “debtors-in-possession” (DIP) and is currently seeking approval of a variety of first day motions containing customary relief intended to ensure its ability to continue ordinary operations.

Starry previously closed at $0.0217, but is currently trading down roughly -30.57% at $0.0151 per share.

Additionally, Starry entered into a RSA with creditors holding 100% of the aggregate outstanding principal amount of the loans under the prepetition credit agreement.

The RSA contemplates a dual-track process of a standalone plan of reorganization or a sale of the business, in either case, to be implemented through the chapter 11 bankruptcy. It also contemplates debtor-in-possession financing in the form of the DIP Credit Agreement and a new money post-emergence credit facility. DIP Financing provided by the Consenting Prepetition Lenders will provide the debtors with at least $43 million in liquidity.

If the restructuring transaction is completed, then holders of loans under the Prepetition Credit Agreement will receive on account of their claims 100% of the common stock in the reorganized debtors, subject to dilution by a management incentive plan providing for a to-be-determined amount of new common shares to be awarded to management and employees, as well as a distribution of warrants to purchase new common shares in connection with the exit facility.

Pursuant to the RSA, each of the debtors and lenders has made certain customary commitments to each other. The debtors have agreed to implement a restructuring and a plan in a timely manner if the transaction is not completed, respond to diligence and status update requests from certain lenders’ representatives, and satisfy certain other covenants. The lenders have committed to support and vote for the plan and have agreed to use reasonable efforts to take, or refrain from taking, certain actions in furtherance of such support. The lenders have also agreed to provide debtor-in-possession financing pursuant to the DIP Credit Agreement.

But, the RSA contains certain milestones and dates by which the company is required to obtain certain orders from the court and complete its emergence from bankruptcy.  Among other dates, the RSA states that the bankruptcy court will have entered an interim order approving the DIP Financing no later than three business days after the petition, a final order approving the DIP Financing no later than 35 days, an order approving the disclosure statement in respect of the plan no later than 45 days after the petition, and an order confirming the plan no later than 80 days after the petition date. Additionally, the company is expected to get out of bankruptcy no later than 45 days after entry of the confirmation order.

The debtors and the lenders may terminate the RSA under certain limited circumstances. Any debtor may terminate the RSA if its board determines that performance is inconsistent with its fiduciary duties, or if the lenders fail to hold at least 66 2/3% of the aggregate principal amount outstanding of the Prepetition Credit Agreement.

The lenders also have specified termination rights, and may terminate if any of the milestones have not been achieved, extended, or waived after the required date.

If the DIP Credit Agreement is approved by the Bankruptcy Court, then the DIP Lenders would provide a senior secured super-priority debtor in possession term loan facility, consisting of $43 million of new cash and an aggregate principal amount of $15 million of Tranche D Loans and the prepetition credit agreement will be converted into a separate tranche of the DIP Facility.

Upon entry of the final order, the remaining Tranche D Loans will be converted into DIP Roll-Up Loans, which term loans will accumulate interest based on a rate of 13% per annum. Additional fees and expenses under the DIP Loans include a $3 million commitment fee payable in kind, and an exit fee equal to 8.00% of the New Money DIP Loans and 5.00% of the DIP Roll-Up Loans, which will be waived in the event of a Restructuring Transaction and the conversion of the DIP Facility to the exit facility.

In April 2022, Starry announced that it would be reducing the warrant exercise price and adjusting the redemption trigger price as a result of the Crescent Term being triggered.

FirstMark initially announced its $1.6 billion combination with Starry in October 2021 and completed the deal in March 2022. Boston-based Starry provides wireless internet to consumers at gigabit speeds using narrow-wave technology.