Squaretwo Financial’s official committee of unsecured creditors filed with the U.S. Bankruptcy Court an objection, request for adjournment, and reservation of rights to the Debtors’ (i) DIP motion, (ii) investor protections motion, (iii) Canadian GUC motion, and (iv) KBW & Miller Buckfire retention application.
The committee asserts, “The DIP Motion is particularly improper. Simply put, the Debtors openly admit – as they must – that a DIP loan is not necessary to continue operations or preserve the assets of the estates….Specifically, the Debtors request approval of a $58.5 million postpetition financing package provided by the DIP Parties – a group comprised of the identical parties as the Debtors’ Prepetition First Lien Lenders. At least $41 million of the DIP Facility will be used to “roll-up” the Prepetition First Lien Lender’s Revolving Loan as an inappropriate form of adequate protection and another approximately $4.3 million will be used to fund certain extraneous fees and expenses of the DIP Parties and make interest payments to the Prepetition Secured Parties. Combined these obligations constitute more than $45.3 million for the two and a half-month period covered by the Budget. And, based on the Debtors’ own representation to the Court, the DIP Facility is not necessary to for ordinary course operating and funding the chapter 11 process….Likewise, the relief sought in the Investor Protection Motion and Canadian GUC Motion are premature and, if granted, will serve to further lock the estates into the flawed reorganization strategy by approving restrictive and costly provisions in the Plan Funding Agreement that serve to ensure that the Debtors are unable to examine any restructuring alternatives and authorize the Debtors to make distributions to prepetition creditors outside of the Plan. Such relief is unnecessary and unwarranted at this time. As this Court is aware, the Debtors seek confirmation of the Plan on an expedited timeline (a mere 35 days from the Committee’s appointment) through a ‘prepackaged plan.’ Unlike typical ‘prepackaged plans’ where unsecured creditors are left unimpaired, this Plan provides no recoveries to general unsecured creditors of the U.S. Debtors. As a result, the Committee believes that the truncated process applicable to prepackaged cases is inappropriate here.”
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