Orchids Paper creditor group objects to sale procedures, DIP facility

By Caroline Salls

Pittsburgh, April 26 – Orchids Paper Products Co.’s official committee of unsecured creditors objected Friday to the bid procedures for the sale of substantially all of the company’s assets and Orchids Paper’s motion for approval of debtor-in-possession financing, according to filings with the U.S. Bankruptcy Court for the District of Delaware.

The committee said in its bid procedures objection that the Orchids Paper debtors “are proposing a sale of substantially all of their assets to the stalking horse bidder (which is also the pre-petition lender and the DIP lender) via a bid-chilling $175 million credit bid that cannot possibly lead to higher or better offers.”

In addition, the committee said an abbreviated sale process proposed by the company is designed to guarantee that the lender will be the successful bidder.

If the lender intends to use Orchids Paper’s Chapter 11 process just to liquidate its collateral, the committee said it must find a process that is fair to all case parties. Otherwise, the creditor group said the cases should be converted to Chapter 7 cases or dismissed.

Meanwhile, the committee said in the DIP financing objection that “it is abundantly clear that the sole purpose of this proposed DIP facility is to fund an expedited ‘friendly foreclosure’ sale of the debtors’ assets for the exclusive benefit of the DIP lender/pre-petition lender rather than the estates as a whole.”

The creditor group also said the proposed DIP facility does not provide enough funding to pay all administrative expenses that will be incurred by the Orchids Paper estates and leaves the estates administratively insolvent.

“The debtors and the DIP lender know that the DIP facility is inadequate and will leave these estates administratively insolvent, yet they continue to pursue final approval,” the objection said.

Hearings on both motions are scheduled for May 1.

Orchids Paper makes consumer tissue products and is based in Brentwood, Tenn. The company filed bankruptcy on April 1 under Chapter 11 case number 19-10729.

© 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.