Exide Technologies lambasted the unsecured creditors’ committee acting in its Chapter 11 proceedings, accusing the panel in a bankruptcy court filing of “playing a dangerous blame game in an attempt to substitute its own agenda for the debtor’s business judgment.”
The focus of the company’s ire is the committee’s objection to approval of proposed amendment to Exide’s DIP facility, and the committee’s request that the bankruptcy court order a 30-day process for the company to consider alternative DIP financing proposals.
As reported, the committee’s primary objection to the proposed amended DIP is that the facility’s allegedly tight milestone deadlines are designed to enable the company’s DIP lenders, many of which are also pre-petition noteholders, to credit bid the company’s most valuable asset, its equity interest in its international subsidiaries. Among other things, the committee alleged that the company refused to give other lenders identified by the committee a fair shot at providing an alternative DIP facility on less restrictive terms (see “Exide panel slams amended DIP; wants alternate financing considered,” LCD, Oct. 24, 2014).
The company’s defense of its proposed amended DIP and its reorganization process, of course, is to be expected, but the attack on and mockery of the unsecured creditors’ committee in the company’s Oct. 28 response to the panel’s objection, while perhaps simply a matter of style, is nonetheless notable given the typical practiced blandness and formality of legal prose.
The company accused the committee of attacking the amended DIP “with guns blazing,” of filing an objection “littered with haphazard barbs,” of expressing “righteous conviction” in its assertion of a “nefarious” scheme, of leveling “incoherent accusations,” of pushing a “conspiracy theory,” and of “casting aspersion” on the company and its professionals, the unofficial noteholder committee, and the company’s DIP lenders “for their alleged master plan to force milestones on the debtor that will result in a credit bid sale in which they will steal the company from junior creditors.”
“The committee’s scorched-earth litigation challenge to the DIP financing is reckless brinkmanship by a desperate constituent acting like it has nothing to lose,” the company said, adding, “It is no secret that the committee fundamentally disagrees with the debtor and senior creditors regarding the trajectory of this case.”
More specifically, the company charges, “The committee seems to disagree with the debtor’s decision to engage with the [unofficial noteholder committee] regarding strategic options.” However, the company continues, “Given that the UNC member’s consent would be required if their claims are to be equitized and they have consistently been the most likely source for investment in any reorganized entity, this group obviously represents the ‘fulcrum’ security here, no matter how much the committee wishes the facts were otherwise.”
Lastly, the company notes, its exclusivity period is slated to expire on Dec. 10. “The committee can then put its money where its mouth is, if it so desires.”
As reported, the unsecured creditors’ committee support for the company has waxed and waned over the course of the case.
On June 17, for example, in response to a motion from the company to extend its exclusivity periods, the creditors’ committee said it had “genuine concerns regarding the [company’s] process in formulating and developing a plan,” adding, “To date, the debtor has not engaged the committee with respect to the plan.”
And on June 30, after the company unveiled the terms of a proposed reorganization plan supported by noteholders – calling it “highly constructive” and its “likely path… to emerge from Chapter 11” – the creditor panel responded that the company had, up to that point, “refused to negotiate with the [creditors’] committee, or, for that matter, any party other than the [noteholders’ committee] in connection with the structure of a plan of reorganization and an exit strategy.” Further, the committee said, the company had “also shunned the [creditors’] committee’s efforts to open the plan process to third parties.”
But on July 31, the company said in a court filing that it had begun negotiations with the official unsecured creditors’ committee, stating that it and the noteholders’ panel had exchanged term sheets with the creditors’ committee and “conducted several in-person meetings among the professionals in an effort to achieve a consensual plan construct.” The company said that the creditors’ committee was currently “evaluating the latest plan proposal and is expected to provide feedback.”
More recently, when the company announced its dual-track approach to a reorganization on Sept. 30, it said it was working toward a “modified proposal that would pay or refinance the existing DIP facility and provide additional capital to fund its reorganization,” adding that it was hopeful that it would reach agreement on a term sheet for a reorganization plan supported by the official creditors’ committee “in the near term.”
Since then, however, the spirit of cooperation appears to have gone south. Last week, the committee filed a motion to compel the company and the unsecured noteholder committee to produce documents in response to discovery requests. That dispute is slated to be heard tomorrow (see “Exide discovery spat with panel may portend bigger fights ahead,” LCD, Oct. 22, 2014).
The discovery spat proved to be a harbinger of the committee’s objection to the amended DIP, filed the next day. A hearing on that is scheduled for Oct. 31. – Alan Zimmerman