H2-Brands’ stalking horse deal draws objection from committee

By Sarah Lizee

Olympia, Wash., March 10 – Nova Wildcat Shur-Line Holdings, Inc.’s (H2-Brands) proposed $27.1 million stalking horse bid for its assets from Gordon Brothers Commercial & Industrial, LLC on behalf of its joint venture with Nations Capital, Inc. drew an objection from the official committee of unsecured creditors, according to documents filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

The committee said that it supports a sale in general, but the stalking horse deal and proposed bid protections – an $813,006 (3%) breakup fee and an expense reimbursement of up to $275,000 – only highlight the significant risk of administrative insolvency and the absence of a benefit to any other party than the lenders whose collateral is being marketed.

“A key feature of the proposed stalking horse agreement is a 180-day post-closing date period, during which the debtors would be required to remain in bankruptcy and be required to provide various services to the buyer,” the committee said.

“But the stalking horse agreement provides no assurance that either the buyer or the lenders will pay all of the costs associated with remaining in bankruptcy during that 180-day post-closing date period.”

The committee said any post-closing winddown undertaken for the benefit of the lenders and a buyer must be cost-neutral to the estates and unsecured creditors.

The group said the court shouldn’t allow the buyer and lenders to reap the benefit of remaining in Chapter 11 without also “paying the freight.”

The committee also took issue with the debtor’s request to incur nearly $1.1 million in bid protections as administrative expenses, when there is no mechanism to assure payment of the foreseeable costs and expenses of remaining in Chapter 11 for six months, including professional fees and U.S. trustee quarterly fees, among others.

Competing bids are due by 5 p.m. ET on March 15, an auction will be held on March 20, a sale hearing will take place on March 24, and the deadline to close the sale is March 31.

H2 Brands is a Cranbury, N.J.-based home and hardware products company. It filed bankruptcy on Jan. 29 under Chapter 11 case number 23-10114.

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