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Leiner creditors committee objects to DIP financing, asset sale procedures motions
By Caroline Salls
Pittsburgh, April 3 - Leiner Health Products, Inc.'s official committee of unsecured creditors objected to the company's debtor-in-possession financing and asset sale procedures motions, arguing that both motions primarily benefit Leiner's senior secured lenders, according to Wednesday filings with the U.S. Bankruptcy Court for the District of Delaware.
The committee said the lenders "will improve their position by expanding their collateral base and layering expensive fees on top of their existing loan obligations" under the DIP facility.
"If the DIP motion is granted, the financial stake of the pre-petition secured lenders will be improved at the expense of the unsecured creditors."
According to the bid procedures objection, since the company is proceeding with the sale process without a stalking horse bidder, there is no guarantee that the sale will provide any significant value for anyone besides Leiner's lenders and its management.
The committee said the court should deny the bid procedures motion and allow the company to market the assets so value can be realized for all creditors.
"The debtors and senior lenders propose a truncated sale process that will proceed at lightning speed," the committee said in the bid procedures objection.
In addition, the committee said the bid procedures "establish unreasonable hurdles and limitations, making it difficult for third-party bidders to submit qualifying bids."
Leiner is a Carson, Calif.-based manufacturer of store-brand vitamins, minerals and nutritional supplements. The company filed for bankruptcy on March 10. Its Chapter 11 case number is 08-10446.
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