iGPS asset sale hearing to enter third day; ruling expected July 23

By Jim Witters

Wilmington, Del., July 22 - A hearing on iGPS Co. LLC's proposed $52 million credit-bid sale of substantially all of its assets to stalking horse bidder iGPS Logistics LLC is scheduled to enter its third day on July 23 in what the judge called a "strange set of facts."

At the end of the second day of the hearing on July 22, judge Kevin Gross said he was "scratching his head" and "struggling with it," as attorneys concluded their presentations of evidence and began closing arguments in the U.S. Bankruptcy Court for the District of Delaware.

The U.S. Trustee's Office, former iGPS CEO and chairman Bobby L. Moore and depot facility service provider Belacon Pallet Services, LLC, objected to the sale.

David Buchbinder, representing the U.S. trustee, said the sale motion and the related asset purchase agreement seek approval of a "bad faith" transaction that does not meet the criteria outlined in the bankruptcy code.

Moore, testifying during the hearing on July 22, said he found 14 potential bidders for the iGPS assets, but all were shunned by the debtor or were hamstrung by the bidding procedures.

Belacon and an informal committee of depot owners say the proposed sale order contains language that obligates them as third parties, in effect writing new contracts through the bankruptcy court.

Debtor's attorney John K. Cunningham said the proposed sale represents the best deal available and provides $2.5 million for general unsecured creditors, who otherwise would be out of the money.

Stalking horse iGPS Logistics was the lone bidder.

The total deal is worth about $165 million, because the buyer has agreed to waive a $150 million deficiency claim and pay off the $12 million debtor-in-possession financing facility.

The controversy centers on an arbitration award the debtors received in a dispute with SAS Schoeller Arca Systems over SAS' failure to honor its 10-year warranty on resin pallets implants with radio-frequency identification tags.

The debtors touted the award - which found SAS liable and ordered the company to repair or replace about 2.2 million defective or broken pallets - as potentially worth hundreds of millions of dollars.

Moore testified that the salvage value of the 7 million pallets iGPS owns would be more than $200 million.

The sale of iGPS's assets, including the arbitration award, to iGPS Logistics neutralizes the award, because the buyer has agreed not to pursue the claim.

Moore and Buchbinder said the sale to iGPS Logistics undervalues the company and does a disservice to creditors and equity holders.

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.

Chase is one member of an eight-bank consortium that sold $148 million of prepetition secured iGPS debt to the joint venture for $28 million.

The sale hearing is scheduled to resume at 2:30 p.m. ET on July 23.

iGPS, an Orlando-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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