Townsends creditors committee objects to DIP financing, sale timeline

By Lisa Kerner

Charlotte, N.C., Jan. 20 - Townsends, Inc.'s official committee of unsecured creditors object to the debtors' motion for orders authorizing postpetition financing and the use of cash collateral, according to a Jan. 20 filing with the U.S. Bankruptcy Court for the District of Delaware.

A hearing is set for Jan. 21.

The committee's reasons for objecting to the debtor-in-possession motion and the debtors' proposed DIP loan include the following:

• The latest version of the proposed budget is inaccurate and incomplete and does not provide for the payment of all administrative claims;

• The interest rate on the DIP loan coupled with DIP loan fees totaling $195,000 yields an effective interest rate of 15.7%, which is exorbitantly high;

• The proposed sale timeline is too short to allow for a robust sale process;

• The fees proposed for the committee's professionals under the budget are inadequate and not an appropriate carve-out;

• The proposed final DIP order imposes on the committee an unrealistically low $25,000 limit on investigation costs; and

• The proposed final DIP order provides for an unrealistically low post-default carve-out amount of only $100,000.

As previously reported, Townsends was granted interim access to $47 million of its proposed $52 million of DIP financing in December.

The loan includes a $12 million revolving credit facility and a roll-up of the company's $40 million pre-bankruptcy revolver.

Interest will be Libor plus 670 basis points, with a 2.5% Libor floor.

The facility will mature on the earlier of 90 days after the closing of the interim DIP order and March 29.

Townsends, a Georgetown, Del.-based poultry processor, filed for bankruptcy on Dec. 19, 2010. Its Chapter 11 case number is 10-14092.

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