Orchids Paper committee lien challenge, sale objection deal approved

By Caroline Salls

Pittsburgh, Sept. 12 – Orchids Paper Products Co. received court approval of a settlement that resolves a lien challenge and asset sale objection motion filed by its official committee of unsecured creditors, according to an order filed Thursday with the U.S. Bankruptcy Court for the District of Delaware.

On June 21, the committee filed a complaint challenging the extent, validity, valuation and priority of the pre-bankruptcy lenders’ liens and security interest in some of Orchids Paper’s assets. The asset sale objection was filed on June 26.

Under the settlement, the company’s lender will set aside $825,000 of sale proceeds solely for payment of general unsecured claims.

A total of $5 million in sale proceeds will be held in escrow pending either court approval of the settlement or the court’s adjudication of the lien challenge and sale objection.

The parties agreed in the settlement to entry of a consensual final debtor-in-possession financing order.

In addition, the lender has agreed to a deficiency claim in the amount of $13.45 million in Orchids Paper’s Chapter 11 cases. The lender will vote the deficiency claim in favor of the company’s Chapter 11 plan if it is acceptable in its discretion but will not participate in any distribution under the plan until all other general unsecured claims are paid in full.

The committee has agreed to dismiss the lien challenge.

Orchids, a Brentwood, Tenn.-based maker of consumer tissue products, filed for bankruptcy on April 1. The Chapter 11 case number is 19-10729.

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