Rowe creditors committee objects to asset sale due to risk of administrative insolvency

By Caroline Salls

Pittsburgh, Dec. 11 - The Rowe Cos. official committee of unsecured creditors objected to the company's proposed asset sale, saying the sale will most likely result in administrative insolvency for the company, according to a Monday filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.

According to the objection, "disguised as a $30 million offer," the purchase price consideration is actually comprised of only $24 million in cash, less cure amounts and subject to other pre- and post-closing downward adjustments, plus up to $6 million in assumed liabilities.

The committee said the assets that are subject to the sale have apparently been valued well in excess of that amount on an orderly liquidation value basis.

"Yet, despite the inadequate return to the estate provided by this offer, the [company has] proposed extremely generous bid protections to Sun that would create substantial barriers to any competing bidders," the committee said in the objection.

In addition, the committee said it is not clear whether the proposed going concern sale to Sun is better than liquidation value, but, assuming that it is in the best interest of the estate, "the marketing runway must be longer, the break-up fee must be significantly lower and narrowly tailored to reimburse Sun for out of pocket costs rather than reward Sun, and the sale procedures must be designed to foster not chill competitive bidding, particularly given Sun's extremely low offer that effectively forecloses any possible return to general unsecured creditors."

The committee also said Sun carefully structured its offer to assure debtor-in-possession lender General Electric Capital Corp. that there will be sufficient funds to satisfy its secured claims and to use the bankruptcy sale process to gain approval "of an all-asset free and clear sale transaction without covering the costs of Chapter 11 administration."

Rowe, a McLean, Va.-based furniture company, filed for bankruptcy on Sept. 18. Its Chapter 11 case number is 06-11142.

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