CHICAGO Ormet 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 court documents.
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 participating."
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 structure (amm.com, Feb. 26).