LSC Communications committee argues DIP financing takes away value

By Caroline Salls

Pittsburgh, May 18 – LSC Communications, Inc.’s official committee of unsecured creditors objected to the company’s motion to obtain debtor-in-possession financing, according to a Saturday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The committee said it recognizes the LSC debtors’ need for post-bankruptcy funding, and it is also mindful of the challenges faced by the unprecedented economic disruption associated with the Covid-19 pandemic, which undoubtedly afforded the revolving credit facility lenders with undue leverage and control over the negotiation process.

“Unfortunately, the end result was a costly and lopsided DIP financing that imposes an inappropriate adequate protection package, undue case controls and other vastly-overreaching provisions that severely prejudice other creditors,” the objection said.

Based on its preliminary investigation, the committee said LSC appears to have a significant amount of unencumbered assets, and the debtors recently identified at least $148 million of those assets.

However, if approved in its current form, the committee said the DIP facility and related adequate protection package would effectively transfer the value of those unencumbered assets to the pre-bankruptcy secured parties and away from unsecured creditors and would harm other creditors as well.

A hearing is scheduled for May 21.

LSC is a Chicago-based provider of digital print, print-related services and office products. The company filed bankruptcy on April 13 under Chapter 11 case number 20-10950.

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