DMX's plans to sell assets runs into opposition of U.S. Trustee

By Ellen Chang

Houston, March 2 - DMX Music, Inc.'s proposed sale of its assets received objections from the U.S. Trustee, according to a filing with the U.S. Bankruptcy Court of the District of Delaware.

The trustee said the break-up fee for the stalking horse bidder was contrary to customary standards and also protested the arrangements for expense reimbursements.

In particular, the stalking horse bidder should not receive a break-up fee if DMX decides not to go ahead with the sale, the trustee said. The fee is intended as an incentive to bid and to compensate the stalking horse for coming to the table - neither of which can be justified if the auction never happens.

Meanwhile, the trustee said reimbursement of expenses should be subject to review to ensure the amounts claimed are "actual, documented and reasonable expenses."

DMX has proposed selling its assets to stalking horse bidder THP Capstar, Inc. for $75 million.

The company has requested approval to pay a breakup fee to THP of $2.25 million. DMX has also requested approval to pay an expense reimbursement of $1.55 million if the company intentionally breaches certain covenants under the agreement. According to the motion, the company is not obligated to pay both the breakup fee and the expense reimbursement.

A hearing is scheduled for March 7.

DMX, a Los Angeles provider of music, video and entertainment to businesses, consumers and airlines, filed for Chapter 11 Feb. 14 and asked the court to approve a sale by auction.

DMX's case is under parent company Maxide Acquisition, Inc. and the number is 05-10429.

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