Levitz Home Furnishings unsecured creditors committee objects to final DIP approval

By Caroline Salls

Pittsburgh, Nov. 8 - Levitz Home Furnishings, Inc.'s official committee of unsecured creditors objected to the company's request for final approval of its debtor-in-possession financing, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The committee said its biggest concern is that the DIP order proposes to give additional collateral and rights to the DIP lenders and to provide for valuable waivers without providing sufficient funding to preserve and dispose of that collateral and avoid administrative insolvency.

In addition, the committee said it objects to the proposed DIP because it contains provisions that are overreaching, harmful to the company's estate and/or contrary to applicable law and public policy.

In particular, the committee said it objects to the provisions that waive the estate's rights under the bankruptcy code and burden the estate with unreasonable fees and expenses related to the DIP.

The committee also objected to the liens that are to be granted to the DIP lenders on assets, such as real property assets, the proceeds of avoidance actions and the company's intellectual property, that were not part of the pre-bankruptcy collateral of the secured lenders.

According to the objection, if the company continues on its current course, the general unsecured creditors are unlikely to receive even a modest distribution.

The committee said it has reviewed and analyzed the budget information and discussed its concerns with the company and the DIP lenders, and discussions with both are continuing.

However, the committee said it has not yet received a satisfactory explanation as to the necessity of certain aspects of the DIP or the feasibility of the funding of the company's case.

A hearing on final DIP approval was scheduled for Tuesday.

Levitz, a Woodbury, N.Y., furniture retailer, filed for bankruptcy on Oct. 11. Its Chapter 11 case number is 05-45189.

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