Reichhold asbestos claimants object to insurance lien in DIP financing

By Kali Hays

New York, Oct. 20 – An informal group of asbestos claimants objected to Reichhold Holdings US, Inc.’s request for final approval of $106.38 million in debtor-in-possession financing, according to an Oct. 20 objection with the U.S. Bankruptcy Court for the District of Delaware.

The company won interim access to $93.26 million of the facility on Oct. 2.

According to the asbestos claimants, Reichhold’s bankruptcy case is intended to separate its assets from “legacy liabilities” allowing for the delivery of unencumbered assets to the DIP lenders.

As previously reported, the lenders are Third Avenue Management, JPMorgan, Black Diamond and possibly other holders of the company’s senior secured notes.

The asbestos claimants are seeking a carve-out of Reichhold’s insurance policies, which have not yet been made available for review in the case, for the sole treatment of asbestos creditors.

Currently, the group says that the insurance policies are “swept up” in a single lien of the DIP lenders under the interim financing order raising “the unseemly possibility the DIP lenders would attempt to liquidate the insurance policies and make off with the proceeds.”

The asbestos claimants also said that the DIP order “improperly stymies the ability of an official committee, including any official committee of asbestos creditors that may be appointed, to investigate, bring, and maintain avoidance actions and other estate-held causes of action,” according to the objection.

While the group has already addressed Reichhold’s U.S. Trustee Roberta A DeAngelis regarding the need for an official asbestos creditor committee, it asked that the court order changes to any final DIP order based on its objections to avoid “prejudice to the asbestos creditors.”

A hearing for final approval of the DIP financing is set for Oct. 27.

Reichhold supplies resins for the industrial, transportation, construction, marine, consumer and graphic arts markets. It is based in Durham, N.C. The company filed for bankruptcy on Sept. 30 under Chapter 11 case number 14-12237.

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