MSD Performance gets approval for bid procedures, cash collateral use

By Jim Witters

Wilmington, Del., Oct. 1 - MSD Performance, Inc. received final approval for the use of its lenders' cash collateral and approval of bidding procedures that lead to a November sale of substantially all of the company's assets.

Judge Peter J. Walsh granted the approvals during an Oct. 1 hearing in the U.S. Bankruptcy Court for the District of Delaware.

The judge also heard an update on the original par lenders attempts to promote their plan for the company and their request to terminate MSD's exclusive periods for filing a Chapter 11 plan and soliciting votes.

Cash collateral

The company received approval to continue to use the lenders' cash collateral through Dec. 20 after resolving objections from the official committee of unsecured creditors.

MSD attorney Thomas A. Howley said the committee was granted additional consent powers in the bidding procedures, and a provision was included regarding the treatment of pre-petition and post-petition trade vendors who have extended credit to the company to ease its liquidity crisis and maintain operations.

Committee attorney Regina S. Kelbon said the changes satisfied her clients.

Bid procedures

Howley said more than 30 parties have signed non-disclosure agreements and gained access to the MSD data room to begin due diligence.

"There has been strong interest," he told the court.

No stalking horse has been identified, although MSD has been negotiating with Z Capital Special Situations Fund II, LP and Z Capital MSD, LLC.

Z Capital holds about 59% of the MSD debt.

Under the approved bidding procedures

• The bidding deadline would be Nov. 18;

• If a stalking horse is identified, the debtors will schedule a hearing for court approval of revised bidding procedures that include stalking horse protections;

• An auction, if necessary, will be conducted on Nov. 21;

• The initial overbid and subsequent bids at auction will be in $500,000 increments; and

• A sale hearing is scheduled for Nov. 26.

Exclusivity period

As previously reported, a group of original par lenders opposes the sale of the company's assets and supports a restructuring instead.

The original par lenders proposed a restructuring plan to the debtors but were rejected.

The lenders then sought to terminate the debtors' exclusive periods for filing a plan and pursuing acceptance, seeking to submit their plan directly to the court.

Randall L. Klein, representing the par lenders, said his clients hope to initiate a dual-track process with competing plans, offering an alternative route to creditors and shareholders.

MSD attorney Amy Edgy Ferber said she has offered to meet with the original par lenders but has not been able to make progress with them during several telephone conversations.

"This is not a refusal to negotiate by the debtors. We don't like their plan. We don't like the terms," Ferber told the court.

The original par lenders include CIFC Funding 2006-I, Ltd.; Golub Capital CP Funding LLC; Golub Capital Partners 2007-2 Ltd.; Golub Capital Partners V, LP; Golub Capital Partners VI, LP; Golub International Loan Ltd. I; Madison Capital Funding LLC and OFSI Fund III, Ltd.

Judge Walsh scheduled a Nov. 22 hearing on the motion to terminate exclusivity.

MSD Performance, an El Paso-based maker of performance auto products, filed for bankruptcy on Sept. 6. The Chapter 11 case number is 13-12286.

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