Renovate America committee objects to bid procedures for Benji assets

By Sarah Lizee

Olympia, Wash., Jan. 7 – Renovate America, Inc.’s official committee of unsecured creditors objected to the company’s proposed bidding procedures for its Benji assets, according to an objection filed Thursday with the U.S. Bankruptcy Court for the District of Delaware.

The committee said the asset purchase agreement filed with the bidding procedures motion encapsulates only part of the proposed transaction with the stalking horse purchaser. The rest of the transaction is outlined in a separate loan purchase agreement.

“In other words, the loan purchase agreement, which is integral to the overall sale transaction, not only was not disclosed as part of the bidding procedures motion but is to be approved separately from – and apparently prior to – the completion of the sale process,” the committee stated.

The group said the loan purchase agreement gives the stalking horse purchaser the right of first refusal for the contracts. If the agreement is approved, the stalking horse bidder will have the ability to block any competing bidder from purchasing the contracts, simply by matching, but not topping, the competing bid.

The committee also said the loan purchase agreement will allow the debtors to sell the contracts on a rolling basis.

“While that could benefit the debtors by creating more liquidity, it could also result in some or all of the debtors’ contract portfolio being sold off, either to the stalking horse purchaser or a third party, before the closing of the sale,” the committee said.

“Bidders who believe they are bidding for a business with an inventory of contracts may find themselves disappointed, while other bidders who might have been interested in only the contracts, or only the underlying business, may not have come to the table at all.

“Competing bidders are being asked, in effect, to bid against a straw man.”

As previously reported, the debtors entered into the asset purchase agreement with debtor-in-possession lender Finance of America Mortgage LLC as stalking horse bidder.

The purchase price under the stalking horse agreement is equal to $5 million, plus assumed liabilities, plus the aggregate purchase price for the loans to be purchased by Finance of America from Renovate, plus the contract prepayment amount.

The agreement provides for a break-up fee of $400,000 and an up to $250,000 expense reimbursement.

Under the proposed bidding procedures, bids are due by 8 p.m. ET on Feb. 9, an auction would be held on Feb. 12, if needed, and a sale hearing would take place on or before Feb. 18.

Renovate America is a San Diego-based provider of financing solutions for environmentally friendly home improvement projects. The company filed bankruptcy on Dec. 21 under Chapter 11 case number 20-13172.

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