Katy Industries sale procedures and $7.5 million DIP facility OK’d

By Caroline Salls

Pittsburgh, June 19 – Katy Industries, Inc. received court approval of the bid procedures for the proposed sale of substantially all of its assets and final court approval of its $7.5 million debtor-in-possession facility, according to orders filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

Jansan Acquisition, LLC, a newly created entity co-owned by Highview Capital, LLC and affiliates of Victory Park Capital Advisors, LLC, is the stalking horse bidder, with a cash and credit bid offer.

According to the sale motion, the stalking horse bid includes the assumption of Encina obligations, a $7.5 million credit bid of outstanding DIP financing amounts, a credit bid of all amounts due under the company’s second-lien credit agreement and assumption of additional liabilities.

If Jansan is not ultimately the high bidder, Katy will pay it a $1.75 million breakup fee and reimburse up to $350,000 of its sale-related expenses.

Competing bids are due by 5 p.m. ET on July 12.

An auction will be held on July 14, if necessary, and the sale hearing is scheduled for July 17.

The minimum initial overbid amount is $1 million. Bids at auction must be made in minimum increments of $250,000.

In addition to the availability of cash collateral under its current first-lien facility, Katy received a commitment for up to $7.5 million in DIP financing from the newly created entity co-owned by Highview Capital and affiliates of Victory Park.

The company said the DIP financing will be used to maintain uninterrupted service and delivery of products to Katy customers during the completion of the sale transaction and to ensure payment to vendors for post-bankruptcy purchases.

Interest on the DIP financing will accrue at Libor plus 1,500 basis points.

The facility will mature on the earliest of 150 days from the bankruptcy filing date, upon completion of a sale of the collateral, upon acceleration of the loan and termination of the commitments under an event of default and the effective date of a Chapter 11 plan.

Katy, a St. Louis-based manufacturer, importer and distributor of commercial cleaning and consumer storage products, filed bankruptcy on May 14. The Chapter 11 case number is 17-11101.

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