GVS Texas Holdings lender RREF objects to bid procedures for assets

By Sarah Lizee

Olympia, Wash., Oct. 28 – GVS Texas Holdings I, LLC lender RREF III Storage LLC objected to the company’s bid procedures for the sale of its assets, according to a Wednesday filing with the U.S. Bankruptcy Court for the Northern District of Texas.

RREF, holder of a second mezzanine secured loan owed by debtor GVS Portfolio I B, LLC, said that it does not object to the sale process in general but has concerns with some of the procedures.

“The debtors have turned the principle of value maximization on its head by seeking approval of certain procedures that contemplate an unreasonably prolonged sale process (approximately six months) and that can otherwise be torpedoed at the eleventh hour by Natin Paul, who can exercise an option to provide a ‘form commitment’ for some unknown amount of additional financing for the debtors,” the lender said in its objection.

RREF called the equity infusion option and other aspects of the proposed bid procedures unreasonable and chilling to a competitive sales process.

“The equity infusion plan contemplates that the debtors will spend many months on an expensive marketing process, but that Paul will have a free option to halt the process a mere days before the scheduled auction,” the lender added.

RREF said that the secured lenders at every level of the capital structure are impaired under the equity infusion plan.

Under the equity infusion plan, the lenders senior to RREF would be reinstated except that any allowed default interest would be capitalized into a two-year note, while RREF would be reinstated except that any accrued but unpaid interest, including default interest, plus RREF’s reasonable expenses would be added to the principal amount of its note.

“This all leads to the illogical result that the debtors, who already have not been servicing their debt for the past two years, would come out of these Chapter 11 cases with more leverage than with which they started,” RREF said.

GVS Texas is an indirect subsidiary of GVS Portfolio I B, LLC, which does business as Great Value Storage, an Austin, Tex.-based storage chain. GVS Texas Holdings I filed bankruptcy on June 17 under Chapter 11 case number 21-31121.

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