Welded Construction – Unsecured Creditors Object to Issuance of Final DIP Financing Order, Citing “Ill-Defined” Financing Needs

November 27, 2018 – The Debtors’ Official Committee of Unsecured Creditors (the “Committee”) objected to the Debtors’ motion to obtain final debtor-in-possession (“DIP”) financing. The objection states, “The DIP Facility has been partially drawn to bridge the Debtors’ liquidity in the immediate post-petition aftermath to project completion with respect to only the Columbia Gas Project. This has been its immediate and only positive function. Beyond that project, the DIP Facility’s further purposes and timeline – along with the Debtors’ ultimate financing needs – are ill-defined at present. The Debtors’ general idea is that the remainder of the DIP Facility will be used to fund receivables reconciliation and litigation, some asset sale activity (given required loan to value covenant maintenance, it is unclear whether such activity will involve marketing of the Debtors’ equipment, a substantial source apparently of unencumbered value to the estate) and perhaps a Plan process – all within the ambit of six months from the Petition Date.

While Debtor and Committee professionals have been actively engaged in discussions about the DIP Facility and other critical case issues as of the date of this Objection, the Committee has not received sufficient detail on the Debtors’ case strategy and therefore the rights and liens of the DIP Facility….All that $212 million of unsecured creditors have before them is a DIP Facility negotiated with equity in the exigent run up to bankruptcy when cash supporting an enterprise with over $1 billion of revenue dwindled to down to a mere $900,000 as of the Petition Date, and based on limited emergency marketing to other financing sources….The Committee is working hard with the Debtors to understand their Plan for the next phase of these cases and the Debtors’ position that there is a significant benefit of keeping these cases in Chapter 11 past the point of project completion. But absent a clear Plan for driving value to creditors, supported by proper budgeting, the Committee must act to conserve the unsecured creditors’ absolute rights in unencumbered assets. Accordingly, at present and as conformed, the Motion should be denied.”