Performance Transportation agent objects to restrictive DIP covenants, high fees and interest

By Caroline Salls

Pittsburgh, Jan. 10 - Performance Transportation Services, Inc. administrative agent and collateral agent Wells Fargo Bank, NA objected to the company's debtor-in-possession financing motion, calling the DIP agreement "merely a facade behind which lender Black Diamond is hoping to unfairly acquire the debtors for itself."

According to the objection filed Thursday with the U.S. Bankruptcy Court for the Western District of New York, the covenants contained in the DIP facility are also too stringent and unnecessarily likely to prompt a default.

In addition, Wells Fargo said milestones included in the DIP motion in connection with the sale of Performance's assets are "unreasonably restrictive."

Wells Fargo said the company is already in default under the DIP facility as a result of a violation of some of the "oppressive financial covenants insisted on by Black Diamond," and the company has breached another covenant by failing to comply with one of the asset sale milestones.

The agent also said Black Diamond also included exorbitant fees and interest rates in the DIP agreement and rejected a more favorably priced post-petition financing package "in favor of its own more onerous and expensive DIP facility."

The final DIP hearing is scheduled for Jan. 18.

Performance Transportation Services, a Detroit-based transporter of new automobiles, sport utility vehicles and light trucks, filed for bankruptcy on Nov. 19. Its Chapter 11 case number is 07-04746.

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