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WL Homes creditors committee objects to proposed $30.88 million DIP loan
By Jennifer Lanning Drey
Portland, Ore., March 6 - WL Homes LLC's official committee of unsecured creditors objected to the company's proposed $30.88 million debtor-in-possession financing from Emaar America Corp., according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.
The committee said the DIP facility impermissibly grants the lender adequate protection for its unsecured claims, including releases for insiders.
More specifically, they said the DIP motion seeks "radical and unprecedented relief," including the allowance of the lenders' pre-petition unsecured claim of more than $400 million, indemnification for any challenges to insiders, limitation on the committee's ability to investigate insiders to just 60 days from the committee's appointment, the right to declare a DIP default if no plan is filed in five months and full plan type releases for insiders with no exceptions for fraud or misconduct.
The creditors said Emaar is an insider and, accordingly, should not be allowed to put limits on the committee as the only independent fiduciary in the case to review the company's operations.
The committee also said the unsecured creditors are the only impaired class that can vote to approve a plan for the company, but the DIP facility intends to destroy that right by allowing the lender to declare a DIP default and exercise rights and remedies on the company's assets and estates.
The creditors also said the March 9 hearing for final approval of the DIP should be adjourned so it can determine whether the DIP loan is necessary.
WL Homes, an Irvine, Calif.-based homebuilder, filed for bankruptcy on Feb. 19. Its Chapter 11 case number is 09-10571.
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