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Avenue Stores unsecured creditors committee objects to DIP facility
By Caroline Salls
Pittsburgh, Sept. 11 – Avenue Stores, LLC’s official committee of unsecured creditors objected to the company’s proposed debtor-in-possession financing, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.
“The proposed financing to be provided by the DIP lenders through the DIP facility is little more than a mechanism to effect the rapid liquidation of the pre-petition secured lenders’ collateral, including the E-Commerce business assets, without regard to the consequences to be suffered by the administrative, priority and general unsecured creditors of the Debtors’ estates,” the objection said.
In addition, the committee said the terms of the proposed financing order are not designed to maximize the value of Avenue’s assets for the benefit of all stakeholders, but rather to advance the interests of the pre-bankruptcy lenders.
Specifically, the committee said the financing terms enhance the return on the claims filed by the pre-bankruptcy secured lenders while providing them with a premature release.
According to the objection, no release should be granted until the committee completes its full investigation into the validity of the claims and liens and potential causes of action stemming from pre-bankruptcy conduct.
The creditor group said Avenue’s pre-bankruptcy subordinated lender is an affiliate of Versa Capital Management, LLC, which holds more than 99% of the equity in the Avenue debtors and “appears to be the recipient of significant monetary disbursements from the debtors beginning in 2012.”
A hearing is scheduled for Sept. 13.
Avenue is a Rochelle Park, N.J., specialty retailer of large-size women’s fashion apparel, footwear and accessories. The company filed bankruptcy on Aug. 16 under Chapter 11 case number 19-11842.
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