Delta Mills' lender agent GMAC Commercial Finance objects to company's plan of liquidation

By Jennifer Lanning Drey

Portland, Ore., June 1 - The agent for Delta Mills, Inc.'s senior secured pre-bankruptcy lenders, GMAC Commercial Finance LLC, objected to the company's plan of liquidation and related disclosure statement, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

In the filing, GMAC said the company's plan of liquidation does not provide a full release to GMAC with regard to claims relating to the company's factoring agreement.

Instead, GMAC said the plan provides that it will continue to serve as a factor for Delta Mills and will remit the proceeds of the company's factored accounts receivable to Delta Mills unless the company elects to discontinue using GMAC's services.

GMAC said the effect of the provision requires it to incur obligations, liabilities and debt chargeable to Delta Mills in respect of the agreements.

The lender agent said in the filing that it will not consent or agree to provide a post-consummation factoring facility unless it determines the terms of the facility to be acceptable.

GMAC went on to argue that despite recognizing its claims as first-priority status, Delta Mills' plan of liquidation would potentially make distributions to five lower classes of claimants before GMAC is paid in full.

Finally, GMAC said the plan fails to provide it with indemnity with respect to the factoring agreement after the plan confirmation date. GMAC said it anticipates claims relating to the factoring agreements will arise after the confirmation date, and therefore GMAC may be held responsible for claims that should ultimately be Delta Mills' obligation.

GMAC said it would consider withdrawing its objection to the lack of indemnity if Delta Mills agreed to set aside an amount of money in an escrow account to be used to reimburse GMAC for damages and fees incurred due to claims related to the factoring agreements.

A hearing has been scheduled for June 8.

Delta Mills is the operating subsidiary of Delta Woodside, Inc., a Greenville, S.C.-based company that manufactures and sells textile products for the apparel industry. Delta Mills filed for bankruptcy on Oct. 13. The Chapter 11 case number is 06-11144.

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