Speedcast creditors committee objects to DIP loan’s lender protections

By Caroline Salls

Pittsburgh, May 18 – Speedcast International Ltd.’s official committee of unsecured creditors objected Friday to the company’s motion to obtain debtor-in-possession financing, according to a filing with the U.S. Bankruptcy Court for the Southern District of Texas.

The committee said it is aware of the difficult financial situation the Speedcast debtors face, and it “does not object per se to the fundamental terms of the proposed DIP financing.”

“Rather, the committee is focused on certain specific aspects of the proposed DIP financing that go far beyond the line that marks a fair balance between secured lender protections, on one hand, and protection of the debtors’ estates and unsecured creditors, on the other,” the objection said.

Although the committee expects that the objectionable aspects of the DIP facility are necessary to protect their investment, the creditor group said any difficulty the lenders had in providing the financing does not justify terms that deprive unsecured creditors of basic rights under the Bankruptcy Code and of currently unencumbered value, which could be significant.

Specifically, the committee said it objected to liens on and claims to previously unencumbered assets for debtor entities that do not have a demonstrated need for funding from the DIP facility.

In addition, the creditor group said it objects to loans benefitting from liens on and claims to avoidance action proceeds and other forms of recovery, as well as “impermissible benefits for the pre-petition lenders disguised as adequate protection.”

The committee said the DIP financing also carries an above-market exit fee, and payments on account of roll-up loans cannot be unwound if pre-bankruptcy debt and/or pre-bankruptcy transfers to the lenders are successfully challenged.

Speedcast is an Australia-based provider of remote communication and IT solutions. The company filed bankruptcy on April 23 under Chapter 11 case number 20-32243.

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