Kid Brands U.S. trustee objects to terms of proposed DIP financing

By Kali Hays

New York, July 10 – Kid Brands, Inc.’s U.S. trustee, Roberta A. DeAngelis, has objected to the company’s interim and final access to $49 million of debtor-in-possession financing and the use of cash collateral, according to a Thursday filing with the U.S. Bankruptcy Court for the District of New Jersey.

As previously reported, the company obtained interim access to the financing June 20.

Specifically, DeAngelis objected to a provision in the DIP motion allowing all claims and causes of action to become part of the DIP collateral and subject to liens granted to the proposed lenders upon final approval of the motion.

“Sufficient justification for such relief is not presented. Avoidance actions must be preserved for the benefit of the estates and the estates’ creditors in these cases,” the objection stated.

DeAngelis also took issue with the inclusion of potential Chapter 7 trustee fees in the interim DIP carve out while the DIP motion does not call for the inclusion of Chapter 11 trustee fees and the “broad, open-ended, wide-reaching release provision for the benefit of each credit party participating in the proposed loan” that is included in the DIP credit agreement.

As previously reported, the company secured the DIP financing from existing lenders Salus Capital Partners, LLC and Sterling National Bank. The proceeds of the DIP financing will be used in part to repay the $44.4 million outstanding under the pre-bankruptcy credit facility provided by Salus Capital, as administrative agent, and a group of lenders.

The trustee asked that the final DIP order include all reasonable fees and expenses of a Chapter 11 trustee in the carve out and that the release provision “be stricken by any final order entered by the court.”

A final hearing on the financing is set for July 14.

Kid Brands, an East Rutherford, N.J.-based designer, importer, marketer and distributor of infant and juvenile consumer products, filed for bankruptcy June 18. The Chapter 11 case number is 14-22582.

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