Ruby Tuesday unsecured creditors committee objects to DIP financing

By Sarah Lizee

Olympia, Wash., Nov. 6 – RTI Holding Co., LLC’s (Ruby Tuesday) official committee of unsecured creditors objected to the company’s motion to access an $18.5 million debtor-in-possession term loan facility, according to a Thursday filing in the U.S. Bankruptcy Court for the District of Delaware.

The group said that the court should not consider approving the loan until it resolves pending motions relating to separate funding.

“As a threshold matter, the court should not consider the DIP motion until it resolves the pending Rabbi trust motions on which these cases hinge,” the group said in its objection.

“By the debtors’ own admission, even if the DIP motion is approved and they obtain the DIP financing, they will run out of cash well before any potential projected emergence if they are unable to access the approximately $28 million of funds in the Rabbi trusts.”

The committee said the debtors have also revised their projections to indicate that they do not need to borrow additional money at this time, and they may not need the additional funding at all if the Rabbi trust motions are approved and they obtain the funds as projected.

“Yet with those motions set to be heard on the same date as the DIP motion, and without knowing their disposition, the debtors insist that the court approve extraordinary relief that would erode the rights of unsecured creditors,” the committee said.

“It is inappropriate – and judicially inefficient – to so fundamentally alter the rights of unsecured creditors when a ruling on the Rabbi trust motions could force the debtors to convert these cases to Chapter 7 or, conversely, obviate the need for additional DIP financing.”

The committee said it struggles to view the DIP financing as anything other than an “unwarranted shift of unencumbered assets to the pre-petition lenders without offering any certainty to the ‘going concern’ exit for these cases or path to a sale with a recovery for unsecured creditors.”

As reported on Oct. 9, the company has obtained court approval to access $12.6 million of the $18.5 million loan.

A final hearing is scheduled for Nov. 12.

Ruby Tuesday is a Knoxville, Tenn.-based foodservice retailer. The company filed Chapter 11 bankruptcy on Oct. 7 under case number is 20-12456.

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