Kid Brands committee says DIP loan not needed, hands control to lender

By Kali Hays

New York, July 17 – Kid Brands, Inc.’s official committee of unsecured creditors objected to the company’s proposed $49 million debtor-in-possession facility and the use of cash collateral, according to a July 16 filing with the U.S. Bankruptcy Court for the District of New Jersey.

As previously reported, Kid Brands received interim access to the facility June 20.

The company secured the DIP financing from existing lenders Salus Capital Partners, LLC and Sterling National Bank, which, in addition to ongoing cash flow, will enable the company to fund its financial obligations while in bankruptcy, according to the motion.

The committee said that the proposed facility “is nothing more than a vehicle for Salus to foreclose on its collateral quickly in a favorable forum, while simultaneously burdening the debtors’ estates with excessive costs and encumbering assets that are presently available for general unsecured creditors.”

Kid Brands’ failure to enter into a stalking-horse agreement by July 3 and to file bid procedures by July 9 are evidence that “there is no way the debtors can pursue a sale that maximizes value on Salus’ timeline,” according to the objection.

The committee went on to claim that Kid Brands’ budget demonstrates no need for new financing as the company has “positive cash flow that can sustain these cases through a reasonable sale process.”

“The ‘need’ for financing is driven by Salus’ demand to roll-up $45.9 million of prepetition debt into more favorable and expensive terms and impose a DIP facility that gives them an expanded collateral package and unfettered control over these cases,” the objection stated.

Unless the terms of the facility are rationalized, the committee asked that the company’s DIP and cash collateral request be denied.

A hearing is scheduled for July 22.

Kid Brands, an East Rutherford, N.J.-based designer, importer, marketer and distributor of infant and juvenile consumer products, filed for bankruptcy June 18. The Chapter 11 case number is 14-22582.

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