Merit Group gets OK to auction assets, name stalking horse bidder

By Lisa Kerner

Charlotte, N.C., July 1 - Merit Group, Inc.'s auction and bidding procedures for the proposed sale of substantially all of its assets were approved, according to a Thursday filing with the U.S. Bankruptcy Court for the District of South Carolina.

The company is authorized, but not required, to enter into a stalking horse bid with MG Distribution, LLC. The deadline was June 30.

Previously, Merit said any stalking horse agreement would include payment of a $1 million break-up fee and reimbursement of up to $1 million of sale-related expenses if that bidder was not the winning bidder at auction.

Bids are due by 5 p.m. ET on July 15, and the auction will be held on July 20.

Qualified bids must be equal to the amount of any stalking horse bid, plus the amount of the break-up fee and expense reimbursement and a $500,000 initial overbid amount.

Subsequent bids at auction must be for at least $250,000 more than the previous bid.

The sale hearing is set for July 21.

The sale must close by 11:59 p.m. ET on Aug. 12.

As previously reported, Merit's official committee of unsecured creditors objected to the bidding procedures, calling the bid protections "exorbitant' and arguing that insider second-lien creditor Stonehenge should not be allowed to credit bid.

The right of Stonehenge to credit bid at the auction is currently under advisement by the court and will be determined by further order of the court, Thursday's filing said.

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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