Merit Group newly formed creditors committee objects to DIP funding

By Lisa Kerner

Charlotte, N.C., May 31 - Merit Group, Inc.'s official committee of unsecured creditors, appointed just last week, objected to the company's request to obtain final approval for $55 million in debtor-in-possession financing, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of South Carolina.

A hearing on the approval is set for June 1.

The committee wants the court to deny the motion for approval unless certain provisions that it considers overreaching are eliminated including the superpriority administrative claim status granted to the DIP lender that has priority over all other administrative claims, completion of a sale of the debtors' assets within 90 days of the petition date and the $175,000 closing fee for the DIP loan.

As previously reported, Merit received interim court approval to obtain $55 million of DIP financing from Regions Bank.

Interest will be Libor plus 725 basis points.

The DIP loan will mature on the earliest of three months from closing or the closing of a sale of the company's assets.

Merit, a Spartanburg, S.C., paint sundry distributor, filed for bankruptcy on May 17. The Chapter 11 case number is 11-03216.

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