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In-Shape: U.S. trustee objects to bidding procedures for assets
By Sarah Lizee
Olympia, Wash., Jan. 5 – In-Shape Holdings, LLC’s bidding procedures for substantially all of its assets drew an objection Tuesday from Regions 3 and 9 U.S. trustee Andrew R. Vara, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.
On Dec. 16, the company filed a motion seeking approval of the bidding procedures and an asset purchase agreement entered into with an affiliate of its debtor-in-possession lenders.
The proposed purchase price is $45.3 million, to be satisfied in the form of a credit bid against the obligations under the DIP agreement and pre-petition credit agreement, plus a cash payment of $250,000 to cover some of the company’s post-closing wind-down costs, an additional amount of cash to cover other specified obligations and assumption of all cure amounts for all purchased contracts and other liabilities of the company.
The debtors agreed to pay a break-up fee of $1 million and an expense reimbursement of up to $500,000 in the event that the asset purchase agreement is terminated.
“A break-up fee must be structured to encourage, not discourage competing bids,” Vara said in his objection.
Vara said that since the purchaser has a strategic incentive to preserve its current interest in the debtors, it does not need the bid protections to secure its participation.
“In addition, the amount of the bid protections is excessive when measured against the cash component of the purchase price,” he added.
In-Shape is a Stockton, Calif.-based health club operator. The company filed bankruptcy on Dec. 16 under Chapter 11 case number 20-13130.
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