Judge denies Digerati access to $750,000 in financing to pay expenses

By Jim Witters

Wilmington, Del., July 1 - A judge denied Digerati Technologies, Inc.'s request for an additional $750,000 of debtor-in-possession financing that the company said it needs to pay salaries, rent and other operating expenses, according to a June 28 filing with the U.S. Bankruptcy Court for the Southern District of Texas.

As previously reported, shareholders Hurley Fairview, LLC and Riverfront Capital, LLC offered loans of $375,000 each at 7% interest.

The court ruled that the debtor failed to satisfy the requirements of the bankruptcy code to show that financing on more favorable terms was unavailable.

The debtor failed to even "go through the motions" of contacting other lenders to try to negotiate better terms, the judge wrote.

"Moreover, these two proposed DIP lenders, if not 'insiders,' ... are hardly parties whose negotiations with the debtor could be considered truly 'arms length,' " Judge Jeff Bohm wrote in his ruling.

Even if "arms length" lenders were available, "the debtor has failed to demonstrate that the proposed loans are necessary to avoid immediate and irreparable harm to the estate," the ruling stated.

In seeking the DIP loan, Digerati told the court that it is a holding company that generates no income.

As a result, the company said, it requires an infusion of funds to pay ongoing expenses in the near term.

Digerati is a Stafford, Texas, diversified holding company with operating subsidiaries in the oil field services and cloud communications industries. The company filed for bankruptcy on May 30 under Chapter 11 case number 13-33264.

© 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.