Oglebay Norton pre-petition lenders balk at DIP lenders getting priority

By Jeff Pines

Washington, March 17 - Oglebay Norton Co.'s pre-petition lenders protested the company's proposal to give its debtor-in-possession lenders priority in terms of liens and the use of cash collateral.

The pre-petition lenders have claims of more than $243 million, and they have first priority liens on just about all of Oglebay Norton's assets. They described the negotiations between the lenders and the company on the terms of the debtor-in-possession financing as "painstaking" in a March 16 filing with the U.S. Bankruptcy Court for the District of Delaware.

To complicate matters for them, they did not get a copy of the proposed final terms until 4 p.m. ET on March 16, the lenders said.

They said the terms they are seeking would give them "basic protections, which over the years the markets have come to realize that a secured creditor with an interest in cash collateral is entitled to receive as the quid pro quo for the use of its cash collateral."

Oglebay's ad hoc committee of senior secured noteholders has already objected to the planned DIP, complaining that the company will have to pay $2 million in fees for nine months of financing because of the size of the facility - which it added is bigger than needed.

Oglebay Norton, a Cleveland-based industrial minerals and aggregates company, has a commitment for a $75 million debtor-in-possession financing.

A March 22 hearing is scheduled.

The Chapter 11 case number is 04-10558.

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