ALCO Stores U.S. trustee objects to lender liens in proposed DIP loan

By Kali Hays

New York, Nov. 10 – ALCO Stores Inc. U.S. trustee William T. Neary objected to the company’s proposed $122.68 million debtor-in-possession financing, according to a Nov. 7 filing with the U.S. Bankruptcy Court for the Northern District of Texas.

As previously reported, the company received interim access to $50 million of the facility on Oct. 16.

Neary’s objection concerns the granting of liens and causes of action to the DIP lenders, Wells Fargo NA and CIT Bank in particular, under the DIP loan agreement.

“Bankruptcy avoidance actions are created after the petition filing and exist for the benefit of unsecured creditors and the debtors and the DIP lenders have failed to make any showing of ‘extraordinary circumstances’ which would justify depriving unsecured creditors of the potential recovery from avoidance actions,” the objection stated.

The trustee also objects to the “limited time period afforded to the official committee to investigate the validity, amount, perfection, priority and enforceability of the debtors’ pre-petition liens.”

Neary asked that the committee be allowed at least 60 days for the investigation period after an initial creditor meeting on Nov. 21 and that any DIP order be amended to reflect his objections.

A final hearing to approve the DIP financing is set for Nov. 12.

ALCO is a Coppell, Texas-based broad-line retailer primarily operating in underserved communities. The company filed for bankruptcy on Oct. 12 under Chapter 11 case number 14-34941.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.