Performance Powersports bid procedures OK’d; gets further DIP access

By Sarah Lizee

Olympia, Wash., Feb. 28 – Performance Powersports Group, Inc. received approval of bid procedures for the sale of its assets, as well as further interim approval of debtor-in-possession financing, according to documents filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

Despite the approvals, judge Laurie S. Silverstein called both the bid procedures and the DIP financing too aggressive at a hearing held Friday.

As previously reported, affiliates of the company’s equity sponsor, Kinderhook Industries, LLC, are serving as stalking horse bidder and DIP lender.

Silverstein took issue with the DIP financing’s releases, as well as the bid protections provided under the stalking horse deal.

“I don’t think I’ve seen this aggressive of a position in a long time,” Silverstein said at the hearing.

The judge said she doesn’t see how the financing, as it is currently proposed, doesn’t unfairly tilt the case in favor of the sponsor, and questioned the bid protections, given the sponsor is “already in.”

By the end of the hearing, Kinderhook agreed to remove the breakup fee and expense reimbursement from the deal and opted for a second interim order on the DIP financing so that modifications could be made before a final DIP hearing, which is slated for March 20.

DIP terms

As previously reported, the proposed $10 million in DIP financing is with Tankas Funding VI, LLC.

The court had allowed the company to access $3.5 million of the facility in a first interim order. Following this second interim order, the company can access another $1.8 million.

The facility is being provided on a junior basis with respect to prepetition secured parties so that no secured lender will be primed by the DIP facility.

The facility is set to mature on March 31, but it may mature earlier if certain events happen prior to then, such as the closing of the sale.

Interest is 15% per annum. Default interest would be another 3%.

Bid procedures terms

CPS USA Acquisition, LLC is acting as stalking horse bidder for the assets. The deal provides for a credit bid of the outstanding debt under the DIP facility, $500,000 in cash, the assumption of debt under a prepetition first-lien credit agreement, other assumed liabilities, and a wind-down amount. There is $52 million outstanding on the prepetition credit facility, plus accrued interest and other expenses.

The now removed bid protections would have provided for a breakup fee of $2.2 million and a $500,000 expense reimbursement.

Under the bid procedures, competing bids are due by 5 p.m. ET on March 7, an auction, if needed, will be held on March 9, and a sale hearing will take place on March 20.

The Tempe, Ariz.-based producer of powersports equipment filed bankruptcy on Jan. 16 under Chapter 11 case number 23-10047.

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