DMX's unsecured creditors committee objects DIP facility, sale plans

By Ellen Chang

Houston, March 3 - DMX Music, Inc.'s official committee of unsecured creditors objected to the company's planned debtor-in-possession financing facility and the proposed sale of its assets, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee said it opposes the intended acquisition by THP Capstar, Inc. for $75 million because the bidding procedures "appear designed" to ensure that THP Capstar is the "successful bidder rather than to maximize value for the debtors' estates."

The committee also said the proposed schedule for the auction is "too abbreviated and would work to chill the bidding process and unduly favor THP."

Furthermore, the creditors believe DMX has failed to market its assets, have an independent valuation analysis and disclose information about THP Capstar and its affiliates and DMX and its affiliates.

"The absence of such disclosure raises further concerns that the debtors' management may be attempting to rush through a sale to THP Capstar," the filing said.

The committee also said the proposed bidding procedures fail to adequately apprise competing bidders of the "true purchase price likely to be paid by THP Capstar."

DMX fails to show that the proposed break-up fee and expense reimbursement is warranted, the committee added.

A hearing has been scheduled for March 7.

The committee also said it objects to final approval of DMX's DIP facility with Royal Bank of Canada because the terms allow the agent and lenders to "significantly control the ability of the debtors to reorganize" and interferes with the ability of the creditors committee to "meaningfully participate in this case."

The committee also states that the DIP terms will skew the reorganization process and permit the lenders, "at the expense of the unsecured creditors, to greatly improve their position for what appears to be an amended credit agreement designed primarily to remunerate lenders."

The $2.6 million interest over the 16-week budget period is 43% of the projected post-petition borrowings, the committee noted.

It also objected to terms of the financing allowing the company to charge for attorneys and other financial fees, which, the committee claims, violates the bankruptcy code, which only allows fees to be paid if the party seeking the fees is over-secured.

Another objection is that the DIP agency fee of $200,000 and commitment fee of $500,000 are "excessive" and seem "unreasonably high."

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

To implement the sale, DMX proposed an auction on April 20.

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

© 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.