Hines Nurseries committee objects to lender control in proposed sale

By Caroline Salls

Pittsburgh, Feb. 23 - Hines Nurseries LLC's official committee of unsecured creditors objected to the company's proposed asset sale and asked the court to order a cash-only sale in case a committee motion to challenge the senior lenders' asserted security interests is granted, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

Since the bidding procedures were approved in December, the committee said it investigated the claims Hines Nurseries' estates may hold against third parties and identified potential claims against the senior lenders.

Based on these findings, the committee said it is seeking court approval to prosecute claims against the senior lenders.

The creditor group said Black Diamond's pre-bankruptcy claims are subject to equitable subordination or recharacterization as equity.

In addition, the committee said it is seeking court approval to challenge the senior lenders' liens on some of the company's assets.

If the senior lenders were to credit bid all or parts of their pre-bankruptcy claims for Hines Nurseries' assets, the committee said the sale order should specifically require cash payment in case the committee's motions are successful.

Because the proposed sale would benefit only the senior lenders, with Black Diamond owning 100% of the equity interests in the Hines Nurseries debtors, while providing no benefit to unsecured creditors, the committee said the sale constitutes an "impermissible sub rosa plan."

Specifically, the committee said the senior lenders would be liquidating its assets for their own benefit "and leaving behind an administratively insolvent shell."

The committee said no winning bid had been selected as of Feb. 23.

Also, the committee said any cash proceeds from the sale, except those used to repay post-bankruptcy financing, should be placed in escrow until it has had a full opportunity to prosecute the claims and draft a related complaint.

Hines Nurseries, an Irvine, Calif., commercial nursery operation, filed for bankruptcy on Oct. 12. The case was filed under the name Consolidated Horticulture Group LLC. The Chapter 11 case number is 10-13308.

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