High Voltage Engineering equity holders object to DIP facility

By Ellen Chang

Houston, Feb. 15 - High Voltage Engineering Corp.'s planned debtor-in-possession financing facility ran into objections from an ad hoc committee of equity holders, according to a Monday filing with the U.S. Bankruptcy Court for the District of Massachusetts.

The committee, which owns 43% of the outstanding equity, said it objects to the company's motion for post-petition financing because High Voltage is moving ahead too quickly with a sale of assets without adequately considering other alternatives.

Noting that the company only emerged from its previous bankruptcy proceedings six months ago, the committee said High Voltage has now "plunged into the instant case with the apparent intention of liquidating unspecified portions of their assets."

The committee also said the company has not provided information about the liquidation, but is proposing a financing scheme that would "pre-ordain the future course of this case."

The committee said the court should not approve "another hasty and ill-conceived reorganization." It also stated that a "rushed sale" will not "maximize the value for creditors and equity holders."

The equity holders also said they believe the company needs to devote more time to finding alternative methods of financing for its reorganization. A rapid sale would only benefit the secured creditors, the committee said.

High Voltage has a commitment for $16.2 million of debtor-in-possession financing from GE Commercial Finance. It is asking for interim approval for $5 million, of which $2.5 million will be available immediately and $2.5 million once it meets certain conditions.

But the loan will "chill the potential interest of possible purchases of the debtor's assets and thereby limit the amount that can be realized in any sale," the committee said.

The committee also said they oppose the GE financing because the loan terms "suggest an absence of business judgment." The proposed financing terms call for the company to solicit bids for their assets by March 18 at a "minimum price acceptable to GE." This financing would give GE the license of the company's intellectual property, control over the company's budgeting and access to the company's businesses and facilities. In addition, the terms of the loan are linked to the performance of High Voltage's foreign subsidiaries under contract with a GE affiliate. If a default occurs, GE would be able to utilize a license of the company's proprietary intellectual property. These provisions "place GE in a controlling position," the committee argued.

High Voltage filed Feb. 8 for Chapter 11 in the U.S. Bankruptcy Court for the District of Massachusetts. Its case number is 05-10787.

The New Kensington, Pa., maker of industrial power control and surface analysis products previously emerged from Chapter 11 on Aug. 10, 2004 under a restructuring that converted its 10½% senior notes to equity in the reorganized company.

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