| Add to balance / Manage account | User: | Log out |
| Prospect News home > News index > List of issuers G > Headlines for Gadzooks, Inc. > News item |
Gadzooks official unsecured creditors committee won't roll over on financing
By Jeff Pines
Washington, Feb. 20 - Gadzooks Inc.'s official committee of unsecured creditors is not prepared to roll over on the company's debtor-in-possession financing, according to a filing with the U.S. Bankruptcy Court for the Northern District of Texas, Dallas Division.
The objection is based on rolling in $22 million of pre-Chapter 11 secured debt into the DIP.
Gadzooks obtained an interim order to retain its pre-petition primary secured lender, Wells Fargo Retail Finance LLC, to provide a $30 million debtor-in-possession financing package.
The committee notes that "nothing in the comprehensive scheme that Congress established provides for the payment of pre-petition claims before confirmation of a plan of reorganization." Rolling the pre-Chapter 11 debt into the DIP "preordains" how it will be treated in the plan.
It cites In re Equalnet Communications Corp., where the bankruptcy court rejected an attempt to roll prepetition debt into post-bankruptcy filing debt.
In fact, the committee does not even think the company needs a debtor-in-possession facility because enough of a cash cushion exists that should allow the use of cash collateral, and Gadzooks, a Dallas-based retailer, is closing 156 stores, and cash from liquidation sales will also help the company's liquidity.
The company was given an interim order on its financing motion, which allowed all of Gadzooks' postpetition receipts to be remitted to Wells Fargo. The committee wants those proceeds deposited into the company's operating account so it can be used as cash collateral.
The Chapter 11 case number is 04-31486. The company filed for bankruptcy in early February.
© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere.
For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.