Corp.s unsecured creditors claim that proposed bidding
procedures for the bankrupt aluminum producer would unfairly
benefit Wayzata (Minn.) Investment Partners LLC and could
discourage other bidders from coming forward.
The goal of an asset sale under
bankruptcy laws should be to "maximize the proceeds received by
the debtors estate," Ormets official committee of
unsecured creditors said in a March 15 court filing in U.S.
bankruptcy court in Delaware.
But proposed bidding procedures
"will accomplish the opposite result, namely chill bidding,
limit participation by prospective bidders and result in (an)
overall process that is unfairly slanted in favor of the
Wayzata entities," the unsecured creditors committee said in
The stalking horse in the
bankruptcy proceedings, Smelter Acquisition LLC, is a Wayzata
entity, the unsecured creditors note, contending in court
documents that portions of the proposed asset purchase
agreement for Ormet and the bidding procedures for the company
"appear designed to ensure that (the) stalking horse will
receive favorable benefits from the sale and that other
prospective bidders will be discouraged from
Among the changes the unsecured
creditors would like to see are a "short adjournment" of a
hearing, scheduled for March 20, on bidding procedures; a
requirement that the stalking horse also serve as a backup
bidder until a closing occurs; and the right of the unsecured
creditors committee to challenge the Wayzata entities
"alleged secured claim," valued at up to $140 million, which
the committee said could be used to make a credit bid.
Unsecured creditors would also
like the stalking horse to be required to make a good faith
deposit as other bidders must, the committee to receive
information submitted by potential bidders at the same time as
the debtors, and entities related to Wayzata to be kept from
receiving information related to competing bids or the
qualification of potential bidders.
Ormet Corp. last month filed for
Chapter 11 bankruptcy protection, citing high legacy and power
costs and low aluminum prices. The Hannibal, Ohio-based primary
aluminum producer also said it had entered an agreement to be
acquired by a company owned by private equity firm Wayzata
(Minn.) Investment Partners as it looks to restructure and
re-emerge from bankruptcy protection with a better cost
amm.com, Feb. 26).