Hussey Copper creditors file objection to $50 million DIP financing

By Jim Witters

Wilmington, Del., Oct. 14 - Hussey Copper Corp.'s official committee of unsecured creditors objects to the company's proposed $50 million debtor-in-possession financing, according to documents filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

A final hearing on the DIP facility is scheduled for Oct. 18.

As previously reported, PNC Bank, NA is the DIP loan agent; PNC, Wells Fargo Capital Finance, LLC and Bank of America, NA are the lenders.

The facility will mature on the earliest of Nov. 28, the effective date of a plan of reorganization, the closing of the sale of substantially all company assets and conversion or dismissal of the bankruptcy case.

Interest will accrue at the alternate base rate plus 500 basis points.

In its objection filed Oct. 14, the creditors committee stated:

• The $50 million DIP credit facility is unnecessary, because the debtors' budget submitted with the DIP motion shows the debtors need only $218,000 of new money between the petition date and the week of Dec. 2 and only if certain lender fees are paid;

• For the 60-day post-petition credit facility, the debtors will pay at least $1 million in DIP fees, $250,000 in DIP expenses and various other fees and expenses;

• The only purpose of the DIP facility is to shore up the banks' liens on substantially all of the debtors' assets.

"Substantially all of the funds under the DIP facility that the debtors may use pursuant to the budget are used to pay off approximately $38.2 million owed by the debtors to the bank group under a pre-petition revolving credit, term loan and security agreement dated as of January 20, 2006. To the extent that the bank group's liens under the credit facility left certain assets unencumbered, the roll-up of the credit facility proposed by the DIP facility closes that gap," the motion stated;

• The DIP also grants the banks replacement liens and superpriority claims on the debtors' post-petition assets, including Chapter 5 causes of action;

• The DIP contains undue restrictions on the debtors' operations. The DIP requires that the debtors sell all of their assets within 45 days of the petition date, restricts the debtors' ability to pay all administrative expense claims and forecloses the creditors' setoff and recoupment rights;

• The DIP places an unreasonably short deadline of 44 days for the creditors committee to review and analyze the banks' liens and to investigate potential claims against the pre-petition secured parties; and

• The DIP facility "hampers the committee's remedies should the committee's investigation uncover that valid claims exist against the pre-petition secured parties by denying the committee proper standing to bring such claims, while, at the same time, providing for unconscionable releases of the pre-petition secured parties and other third parties if no such claim is timely asserted."

Hussey, a Leetsdale, Pa.-based copper products manufacturer, filed for bankruptcy on Sept. 27. Its Chapter 11 case number is 11-13010.

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