Quantum Foods committee objects to DIP loan, suggests different lender

By Caroline Salls

Pittsburgh, March 17 - Quantum Foods, LLC's official committee of unsecured creditors objected to the company's proposed post-bankruptcy filing and said the company should obtain financing from stalking horse bidder Oaktree Capital Management LP, according to a March 17 filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee said the currently proposed debtor-in-possession financing is an attempt by pre-bankruptcy and DIP facility lender Crystal Financial, LLC, "to force a quick sale of the debtors' businesses exclusively for Crystal's benefit."

"While Crystal is at it, it seeks to charge excessive fees and improperly cross-collateralize its prepetition debt, all the while providing little incremental liquidity," the committee said in the objection.

In addition, the creditor group said Crystal insisted on a quick sale timeline as soon as bidding reached a level that would pay it in full but pay nothing to anyone else.

However, the committee said, Crystal's "self-serving strategy backfired" when negotiations over a stalking horse agreement with its preferred purchaser came to an impasse.

According to the objection, the committee "bailed Crystal out" by working with an affiliate of Oaktree Capital Management and completing a stalking horse agreement with Oaktree that is economically better by "many millions of dollars" than the lender's agreement and extends the sale timeline by about 30 days.

Despite this, the committee said Crystal still wants to roll up all of its pre-bankruptcy debt and "charge the debtors exorbitant fees for extremely limited real new money."

The committee said Quantum Foods should use Crystal's cash collateral and obtain DIP financing from Oaktree, which the creditor group said it believes likely will be made available upon request.

Quantum Foods, an Illinois-based provider of cooked beef, poultry and pork for school, military and retail outlets, filed for bankruptcy on Feb. 18 under Chapter 11 case number 14-10318.

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