August 9, 2018 – ActiveCare’s official committee of unsecured creditors filed an objection [Docket No. 103] to the Debtor’s financing motion [Docket No.9] citing concerns over a number of provisions that prejudice the Committee’s exercise of its fiduciary obligations.
The committee asserts, “This Court should not permit the DIP Lender to hold the Debtors (and, by extension, unsecured creditors) hostage by imposing potentially crippling provisions which collectively have the effect of placing the DIP Lender in complete control over these cases. The DIP Lender does not care about value maximization as it has but one goal—to achieve repayment of the DIP Facility in full, in cash, on an expedited basis….The proposed DIP Facility, however, undermines the Committee’s ability to acquit its duties by putting these cases on an unrealistic timeline tying liquidity to a predetermined sale process that has not been examined by the Committee and may be destructive of value. At this stage of the case, however, it is unclear whether a sale process requested by the Debtors and the DIP Lender is the best option. Accordingly, the milestones in the DIP Facility should be modified so that they are not linked to a sale…The DIP Facility leaves the Committee with insufficient resources to do its job. Cases such as these—where there are extensive allegations of fraud and other questionable transactions prior to the Petition Date (including at least one questionable transaction between the Pre-Petition Lenders and Debtor 4G Biometrics on the eve of bankruptcy) and where unsecured creditors stand to obtain little (if any) recovery—cry out the most for a Committee that is equipped with sufficient time and resources to conduct a thorough investigation. An investigation period that is no longer than 60 days from the date of the Committee’s formation is impracticable under the circumstances. Moreover, the budget, including a $25,000 investigation cap to the Committee, is not nearly enough.”
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