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Magnetation Objection Filed

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Magnetation’s ad hoc committee of senior secured noteholders and D.I.P. financing lenders filed with the U.S. Bankruptcy Court an objection to the Debtors’ joint combined motion for an order (i) approving the global settlement agreement, (ii) authorizing the Debtors to wind down their business, (iii) authorizing the Debtors to transfer certain assets, (iv) approving the wind-down incentive and retention plan, (v) approving asset sale procedures, (vi) approving abandonment procedures, (vii) approving contract rejection procedures and (viii) waiving compliance with local rule.

The objection asserts, “Although it is not a liquidation plan, the Wind-Down Agreement calls for the Debtors’ liquidation and cessation of operations by as early as September 30, 2016. This outcome would inure only to the benefit of insiders and the Revolving Lender, while having a devastating effect on the Debtors’ employees, creditors, and other stakeholders.”

The objection continues, “If the Debtors were able to skirt the plan solicitation and confirmation requirements, they would still be subject to the rigors of section 363(b) of the Bankruptcy Code as a sale of substantially all of the Debtors’ assets. Further, the Wind-Down Agreement contemplates a transaction involving and benefiting insiders and therefore must be subject to heightened scrutiny. Unfortunately, the process implemented here was fraught with conflicts and not designed to encourage third party bidders. Indeed, AK Steel refused to make the Pellet Purchase Agreement available to third party bidders, and the Debtors, for their part, were unwilling to seek such relief from the Court. As if the obstacles to encouraging third party bidders were not already significant, the Debtors also refused to avail themselves of the tools of chapter 11 to force a plan upon non-consenting creditors. Even if the Wind-Down Agreement was somehow viewed properly as a settlement that should be reviewed pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure, the Wind-Down Motion should be denied. Given the crippling conflicts of interests that permeate the Wind-Down Agreement, it simply cannot be the product of proper arms-length negotiations and is certainly not in the best interests of the Debtors’ stakeholders.”

Read more Magnetation bankruptcy news.

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