Manistique Papers gets approval for $5 million interim DIP financing

By Jim Witters

Wilmington, Del., Sept. 28 - Manistique Papers Inc. received interim court approval Wednesday for a $5 million debtor-in-possession credit agreement with mBank, with $2 million of it available immediately.

Judge Kevin J. Carey approved the interim financing during a hearing in U.S. Bankruptcy Court for the District of Delaware. There were no objections to the credit agreement.

The hearing on a final DIP order is scheduled for 2 p.m. ET on Oct. 18.

The DIP interest rate is the Wall Street Journal Prime rate plus 1%, with a floor of 4.25%. The maturity date for the DIP facility is Dec. 31, 2011.

Debtors attorney Daniel B. Butz called the interest rates "extremely advantageous" to the debtors.

A fund established by the state of Michigan will back 50% of the financing.

Additional collateral security of $700,000 will come from four Manistique Papers executives who hold no ownership in the company. They are chief executive officer Jon William Johnson, chief financial officer Linda Lucille Benedetto, general sales manager Larry Edward Koski and sales manager John Gillard Erickson.

mBank will receive post-petition first-priority liens on unencumbered assets of the debtor, priming liens on collateral securing the pre-petition loan held by the DIP lender and superiority administrative expense claims.

As part of the DIP agreement, the debtor will decide no later than Oct. 15 whether to pursue a sale or a plan process.

If a sale process is chosen, the DIP agreement calls for an auction on or before Dec. 15 and a sale order on or before Dec. 20, with closing by Dec. 23.

Manistique Papers, a Manistique, Mich., recycled-fiber specialty paper producer, filed for bankruptcy on Aug. 12. Its Chapter 11 case number is 11-12562.

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