November 27, 2018 – The Debtors’ Official Committee of Unsecured Creditors (“the Committee”) filed an objection [Docket No. 112] to the approval of the Debtors’s sale motion [Docket No. 59]. The objection states, “The Debtors seek approval of overly aggressive, off-market bid procedures and bid protection designed to ensure the sale of substantially all of their assets to an insider – Mercuria Assets Holdings (Hong Kong) Limited (together with its affiliates, ‘Mercuria’). The proposed sale is the final phase of Mercuria’s carefully orchestrated loan-to-own strategy to seize control of the Debtors. Although a loan-to-own strategy generally is not objectionable, where, as here, it is coupled with material over-reaching and the exertion of undue influence, especially by an insider, it cannot satisfy the heightened scrutiny that is required when evaluating the propriety of proposed bidding procedures and bid protections which are offensive even if the proposed stalking horse purchaser were not an insider and the Debtors’ primary pre-petition lender….The first phase of Mercuria’s loan to own strategy was its acquisition of the Debtors’ prepetition working capital facilities. The second phase of Mercuria’s strategy is the provision of off-market DIP financing. The third phase of Mercuria’s loan to own strategy begins with its efforts to obtain approval of the off-market bid protections and imposition of unsupportable bidding procedures designed to effectuate Mercuria’s acquisition of all of the Debtors’ assets outside o a chapter 11 plan through a process designed to deter alternative bidders….The Bidding procedure and Bidding protection should be denied because they are designed with one purpose in mind: to deliver to Mercuria – an insider of the Debtors substantially all of the Debtors assets at the lowest possible price, and with the least amount of competition possible.”
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