iGPS proposed $52 million asset sale delayed; hearing resumes July 22

By Jim Witters

Wilmington, Del., July 19 - iGPS Co. LLC's proposed $52 million sale of substantially all of its assets to its stalking horse bidder was delayed when the parties failed to finish their evidentiary presentations and examination of witnesses during a July 19 hearing in the U.S. Bankruptcy Court for the District of Delaware.

At issue is whether the debtor is selling its assets too cheaply, whether the debtor should be liquidated and whether the sale is being controlled and effectuated to relieve a JPMorgan Chase subsidiary of an arbitration obligation that could run into the hundreds of millions of dollars, according to court testimony and documents.

An auction concluded on July 18 with no qualified bidder other than stalking horse iGPS Logistics LLC.

iGPS Logistics is a joint venture formed by Balmoral Funds, One Equity Partners LLC, SAS Schoeller Arca Systems, and Jeff and Robert Liebesman.

One Equity is a subsidiary of JPMorgan Chase and the owner of SAS Schoeller.

SAS lost an arbitration to iGPS over SAS' failure to honor the warranty on pallets the company produced and provided to iGPS.

Gary Glass, general counsel to the debtor, testified that he believes the damages award in the arbitration could be $100 million or more.

Yet the company, the consortium of eight banks that held $150 million in secured iGPS debt and none of the potential bidders for the debtor's assets desired to pursue the arbitration process to its conclusion, Glass testified.

The joint venture bought the banks' debt and credit bid part of that debt in its offer.

And the agreement forming the joint venture forbids prosecution of the arbitration claim should the sale be approved by the court, Jonathan Victor, Balmoral's managing director, testified during the hearing.

Under cross examination, Glass said that he "took the temperature" of the SAS executives at an April meeting and discerned that "they had no appetite for a settlement." He said he did not directly address the matter during the discussions.

"This company spent $2 million pursuing a claim, won an award with $100 million and decided to walk away without trying to settle?" asked David L. Buchbinder, representing the U.S. Trustee's Office.

Company value

Buchbinder also questioned the true value of the company.

Using court filings and other debtor reports, Buchbinder said that the debtor lists assets with a book value in excess of $592 million. The debtor's principal asset is its pallet inventory valued at $558.35 million.

"This estate is solvent by a significant margin, given the debtor's asset valuation of $592.6 million, as set forth in the debtor's schedules, and total liabilities of less than $200 million. There is no record to support a proposed sale for slightly in excess of $52 million to the debtor's lenders while not paying all other claims in full. The proposed sale should not be approved as well because it does not propose to pay creditors at least as much as they would receive if this case were a Chapter 7," the trustee wrote in an objection.

Witnesses for the debtor, including Glass, testified during the hearing that the true test of the company's value is the marketplace. And no bidder emerged who was willing to pay more for the assets than the stalking horse.

The hearing is scheduled to resume at 9 a.m. ET on July 22 with Victor on the witness stand.

iGPS, an Orlando, Fla.-based operator and owner of a global pallet rental pool with embedded RFID tags, filed for bankruptcy on June 4. The Chapter 11 case number is 13-11459.

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