Big Time Products (BTP) filed with the U.S. Bankruptcy Court an objection to Ironclad Performance Wear’s asset purchase agreement, bidding procedures and stalking horse bid protections.
The objection asserts, “BTP is a potential competing bidder for the Debtors’ assets, and BTP has performed substantial due diligence regarding the Debtors’ business. BTP does not object to the entry of an order establishing procedures for the sale, but those procedures should be fair, should encourage bidding (not chill it), should create a ‘level playing field’ for competing bidders, and should be designed to maximize the value of the Debtors’ assets. Certain aspect of the Debtors’ proposed bidding procedures are contrary to those purposes. In this case, Radians Wareham Holding, (the ‘Loan To Own Bidder’) is seeking to execute an aggressive loan-to-own strategy and has used its leverage to force the Debtors to agree to bidding procedures that will chill bidding. The Loan To Own Bidder acquired the Debtors’ secured debt (which was already in default) prior to the commencement of the bankruptcy cases and commenced sweeping the Debtors’ cash.”
In addition, “This caused a liquidity crisis that apparently permitted the Loan To Own Bidder to extract significant concessions from the Debtors that will chill any potential bidding. First, the proposed bidding procedures (the ‘Bidding Procedures’) require that prospective over-bidders submit a cash deposit of $2 million, which is twice as high as the $1 million deposit paid by the Loan To Own Bidder. Second, the Bidding Procedures’ treatment of the Breakup-Fee is confusing and inconsistent. Third, the Bidding Procedures provide that the bids submitted by prospective over-bidders be either $15,750,000 or $20,750,000….Accordingly, competing bidders have no way of knowing the actual purchase price that they must submit. Finally, the Bidding Procedures provide for a Breakup-Fee in the amount of $500,000, but the Breakup-Fee is unnecessary in these cases because the Loan To Own Bidder is executing an aggressive loan-to-own strategy and does not need any ‘incentive’ to serve as the stalking horse.”
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