Real Mex creditor group objects to noteholder tactics in proposed sale

By Caroline Salls

Pittsburgh, Feb. 8 - Real Mex Restaurants, Inc.'s official committee of unsecured creditors objected to the company's proposed asset sale, arguing that the sale releases the company's noteholders, leaves its estates administratively insolvent and provides no recovery for general unsecured creditors, according to a Feb. 8 filing with the U.S. Bankruptcy Court for the District of Delaware.

"From the outset of these cases, the committee expressed concern that the debtors were embarking on a skewed process destined to culminate in a glorified foreclosure sale to their prepetition noteholders," the committee said in the objection.

The committee said the company is seeking approval of a bid "championed by a subset of noteholders" that consists of an $80 million credit bid and $53.6 million in cash.

"Regardless of whether the bid qualified, a fact the committee disputes, the bid is a far cry from the $60 million plus cash bid touted by the majority noteholders in open court less than three weeks ago," the creditor group said.

The committee said the $60 million cash bid would have paid administrative expenses in full and provided a recovery for general unsecured creditors.

In addition, the committee said the majority noteholders chilled the bidding process, as no meaningful competing bid materialized because of the looming credit bid and lack of transparency.

"The majority noteholders seized on the lack of competition to submit a depressed value bid, release themselves from liability to the estates and freeze out general unsecured creditors from any recovery despite the existence of significant unencumbered assets," the committee said in its objection.

A hearing is scheduled for Feb. 10.

Real Mex is a restaurant company based in Cypress, Calif. The company filed for bankruptcy on Oct. 4 under Chapter 11 case number 11-13122.

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