Law360 recently published an article covering an unusual bankruptcy court case for which Culhane Meadows’ Delaware partner Mette Kurth is co-counsel for the debtors.
Here are a few excerpts from the article:
Bankrupt home improvement lender Renovate America Inc. pushed off a looming fight with unsecured creditors over its Chapter 11 sale terms Friday after its bankruptcy lender and stalking horse bidder agreed to add one week and $5 million to its original $18 million interim loan deadline.
U.S. Bankruptcy Judge Laurie Selber Silverstein approved the changes after talks among the debtor, lender and prospective buyer Finance of America Mortgage LLC and Renovate’s official committee of unsecured creditors stretched more than two hours past a scheduled hearing start.
“Generally speaking, in the broadest sense, what we need is to make sure we have no default under the milestones” in the debtor in possession agreement before a rescheduled hearing on the final DIP order Thursday, said Sharon Z. Weiss of Bryan Cave Leighton Paisner LLP, counsel to Renovate.
The extra cash and postponement were hammered out in the shadow of unsecured creditor arguments that bidding for the business would be chilled by unprecedented loan terms and deal protections that lender and stalking horse bidder FAM had demanded as part of its offer for the company.
Under FAM’s bid, any other buyer would have to repay in full the entire outstanding balance of the DIP within five days of outbidding the stalking horse at auction. The committee estimated the likely DIP balance at the time of bid decision at $38.75 million, or 90 percent of the minimum bid needed to beat FAM’s current $42.65 million offer. Repayment would be required without certainty that the alternative sale would ever get to closing.
“A financially unsophisticated home purchaser would not offer to purchase a house if he or she were required to commit to paying off the existing mortgage even if the house purchase did not close,” the committee said in an objection filed this week. “Yet the debtors and FAM claim that highly sophisticated financial and strategic buyers will risk tens of millions of dollars on a transaction that may never close.”
Renovate hit Chapter 11 on Dec. 21 with $115 million in liabilities and $102 million in assets with plans for a sale. Among its troubles, the debtors cited tightened requirements for financing of home energy efficiency improvements and, more recently, the market blunting effects of the COVID-19 pandemic. The business also has to face government and consumer class litigation over its origination and administration of home energy efficiency loans under a government program for middle- and low-income property owners.
Read the entire article HERE.
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