Sirva creditors committee calls DIP loan unnecessary, objects to plan 'discrimination'

By Caroline Salls

Pittsburgh, Feb. 26 - Sirva Inc.'s official committee of unsecured creditors said the company's proposed debtor-in-possession financing is unnecessary and "is an obvious attempt by the debtors' pre-petition lenders to gain inappropriate leverage over the committee concerning an inevitable plan fight to follow."

According to the committee's objection filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York, Sirva could operate on a cash collateral basis without the need for DIP financing.

In addition, the committee said it cannot support the company's pre-packaged plan of reorganization because it calls for no distribution to general unsecured creditors.

The committee said Sirva and its pre-bankruptcy lenders have also tried to fix holes in the lenders' collateral position by proposing the super-priority $150 million DIP facility.

The committee said virtually all of the DIP financing proceeds will be used to either recirculate or satisfy pre-bankruptcy lender claims or to pay interest and fees to the lenders.

"The pre-petition lenders have obviously elected to pick a fight with the holders of class 5 claims, rather than simply confirming a conventional pre-packaged plan," the committee said in the objection.

"The DIP financing is largely an exercise in manufacturing lender administrative claims to be used as clubs in that fight."

Sirva, a Westmont, Ill.-based relocation services provider, filed for bankruptcy on Feb. 5. Its Chapter 11 case number is 08-10375.

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