KeyBank and Appvion’s official committee of unsecured creditors filed with the U.S. Bankruptcy Court separate objections to the Company’s motion for an order approving bidding procedures in connection with the sale of substantially all of the Company’s assets, approving stalking horse protections and approving and authorizing the sale of substantially all of Debtors’ assets.
KeyBank asserts, “KeyBank is a DIP Lender pursuant to the DIP Credit Agreement with respect to approximately $15,471,250 of the ‘Roll-Up Loans’, which constitute ‘DIP Obligations’ under the DIP Financing Order….The Majority Lender under the DIP Credit Agreement is defined as certain funds and accounts managed by Franklin Advisers. Franklin is not the Administrative Agent under the DIP Credit Agreement and is not authorized to credit bid. Franklin, however, attempts to use its position as the Majority Lender under the DIP Credit Agreement to favor itself in violation of the applicable terms of the DIP Credit Agreement and the DIP Financing Order. Specifically, Franklin’s proposed bid–encourages a default under the Credit Agreement–and provides for (i) the assumption of the NM Term Loan Obligations into debt of the new entity to be formed to acquire the Purchased Assets, for which Franklin is the primary lender, and (ii) the credit bidding of the Roll-Up Loan Obligations in exchange for equity in the new entity.”
In addition, “Such disparate treatment violates the relevant terms of the DIP Credit Agreement and the DIP Financing Order, which require the pro rata treatment of NM Term Loan Obligations with the Roll-Up Loan Obligations. This fundamental failing, along with the inability of Franklin to credit bid, requires the Court to deny the Motion without even determining if the bid procedures are fair….In addition, the Bidding Procedures fail to quantify the Stalking Horse Purchase Price. Potential bidders, therefore, are left to guess the amount necessary to satisfy the Minimum Initial Overbid Amount as required to submit a Qualified Bid. Finally, the Debtors have not demonstrated that the Purchased Assets have been adequately marketed.”
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