Republic's bank agent objects to Perry bid, unsecured creditors object to lenders' bid

By Carlise Newman

Chicago, Dec. 4 - Republic Engineered Products Inc.'s bank agent, Fleet Capital Corp., has objected to the company's sale of assets to Perry Strategic Capital for $225 million, saying the offer will result in lower payments to creditors and that the bid it and other lenders submitted would be more beneficial.

In addition, the unsecured creditors' committee filed a motion to block the lenders' bid.

Under the purchase agreement, Perry, which has stalking horse status, would pay $40 million in cash, a further amount of up to $45 million to repay borrowings outstanding under Republic's debtor-in-possession credit facility less the amount refunded and assume Republic's $80 million of senior secured notes.

Fleet said the company rejected a bid by Sun Capital and the secured lenders and a series of bids from the secured lenders themselves. The secured lenders had submitted, as a last resort, a $280 million credit bid for all assets covered by the Perry bid. A credit bid gives the secured creditor protections against attempts to sell collateral too cheaply, which Fleet warned is Perry's intention.

Republic rejected the bid, saying the lenders cannot credit bid because the auction is for all assets and the lenders do not have a lien on all assets. Fleet said it was Republic's decision to bundle the secured lenders' collateral with the collateral of others and sell it together, which cannot deprive the creditor of rights. The secured lenders, in their credit bid, agreed to give identical treatment for other secured creditors and unsecured creditor groups, as did the Perry bid.

"How can a credit bid be precluded under these circumstances since other creditors will receive treatment commensurate with what the stalking horse bid proposes?" Fleet asked in the filing.

The creditors' committee opposes permitting the credit bidding by the lenders, saying actions of the lenders resulted in significant damage to the company's business by causing significant loss of customer and vendor confidence. In addition, with Republic's high fixed costs, any loss in production or orders has a significant negative impact on the company's profitability and enterprise value, the committee said.

The committee also said it believes that the lenders' actions also led to the bankruptcy filing.

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