First Mariner U.S. Trustee adds opposition to sale, DIP loan motions

By Caroline Salls

Pittsburgh, March 4 - The U.S. Trustee for First Mariner Bancorp's Chapter 11 case objected to the company's proposed asset sale procedures and debtor-in-possession financing, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Maryland.

"Taken with the onerous terms and conditions on competing bids contained in the bid procedures motion, the overall transaction bears the character of a 'lock-up,'" Region 4 U.S. trustee Judy A. Robbins said in the objection.

"It is because of the built-in, trip-wire aspects of the proposed arrangement that the U.S. Trustee is required to object, so that the integrity of the bankruptcy process is maintained."

The U.S. Trustee said the terms of the bid procedures motion are relevant to the consideration for the financing motion "because they are part-and-parcel of the same apparent sub-rosa regime in this case: to sell the bank to the RKJS group without actual competitive bidding."

Robbins said the terms of the lending appear aimed to stack the deck in further favor of the RKJS group bid by front-loading the amount competing bidders would have to post in order even to be considered to have given a qualified bid.

Robbins said First Mariner claims it has no operations and no employees.

"There is simply no reason apparent for it to borrow $2.5 million other than to chill and preclude potential bidders," the objection said.

In addition, the U.S. Trustee said some other conditions of the proposed borrowing "impose dire consequences should the lender not be the successful acquirer of the debtor's assets."

Specifically, Robbins said the loan matures on the day after the court approves a sale to someone else, the loan matures if the Federal Deposit Insurance Corp. is made receiver, First Mariner becomes obligated to repay the lender's reasonable costs for the transaction on the day following an order approving a sale to someone else and the company's failure to repay all outstanding loans on the day after a sale to another buyer constitutes an event of default.

"Conditions imposed by the bid procedures motion are especially daunting, and seem intended to chill active bidding," the objection said.

First Mariner, the Baltimore-based holding company for 1st Mariner Bank, filed bankruptcy on Feb. 10. The Chapter 11 case number is 14-11952.

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