IdleAire files Chapter 11 bankruptcy to complete sale of substantially all assets

By Caroline Salls

Pittsburgh, May 13 - IdleAire Technologies Corp. filed Chapter 11 bankruptcy Monday in the U.S. Bankruptcy Court for the District of Delaware.

The company is seeking court approval of the bid procedures for the proposed sale of substantially all of its assets to IdleAire Acquisition Co., LLC, an entity affiliated with members of the company's majority secured noteholder group.

Under the sale agreement, IdleAire Acquisition will pay $10 million for the assets plus assumption of liabilities.

The portion of the purchase price not included in assumption of liabilities will be paid as a credit bid.

The company said the investors are providing up to $25 million of debtor-in-possession financing, hold a $3.7 million pre-bankruptcy claim secured by a lien of substantially all of the company's assets and have a right to direct indenture trustee Wells Fargo Bank to credit bid up to $320 million of the company's 13% discount notes.

In exchange for providing the company's DIP financing, no deposit has been paid by the stalking horse bidder.

The bid procedures must be approved by May 15.

Overbids are due on July 1, the auction must be held by July 3 and the sale hearing must be held by July 8. The purchase agreement requires the sale to close by July 18.

Initial overbids must be for the sum of the greater of the purchase price or all amounts owed under the DIP financing, plus the amount of the assumed liabilities, a $1 million break-up fee and $500,000 for expense reimbursement.

Bids at auction must be for at least $500,000 more than the previous bid.

All bids must include a 10% cash deposit.

IdleAire is seeking interim access to $8 million of the $25 million DIP facility, plus the amount needed to pay off its pre-bankruptcy lender debt.

Wells Fargo is the administrative agent and collateral agent.

Interest will be 15%, payable in kind at maturity.

The DIP facility will mature on the earliest of July 18, upon completion of the asset sale, upon the company's acceptance of an offer to buy substantially all of its assets to a buyer that does not meet the lender's criteria, on the effective date of a plan of reorganization and 30 days from the bankruptcy filing date if a final order has not been issued.

IdleAire will pay a $1.25 million commitment fee and another $1.25 million fee if the asset sale is not approved by the court within 60 days of the bankruptcy filing date.

Debt details

As of Dec. 31, IdleAire had $210.88 million in assets and $303.62 million in debt.

The company's largest unsecured creditors are administrative agent Wells Fargo Bank, Minneapolis, with an unknown amount debt claim, PB Constructors Inc., New York, with a $23 million litigation-related claim and Nancy Younger for the estate of William Younger, Miami, with an $18 million litigation-related claim.

According to court documents, although the company's proposed DIP financing should allow it to continue its operations for the short term, "a projected period of continuing operating losses suggests that the only viable long-term solution, which will preserve the value of its assets, the jobs of its 1,200 employees and its business, is through a sale."

Faced with a "rapidly approaching liquidity crisis" and having received some interest from potential buyers, the company said its board of directors decided that filing bankruptcy to complete the asset sale was in the best interest of IdleAire's creditors.

Based in Knoxville, Tenn., IdleAire is a privately held research and development company that provides products and services for the long-haul trucking freight industry. Its Chapter 11 case number is 08-10960.

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