Smarte Carte creditor HVB says Chapter 7 would give bigger payout

By Ellen Chang

Houston, March 28 - Smarte Carte, Inc. creditor Bayerische Hypo-Und Vereinsbank AG, Cayman Branch, said it objects to the company's proposed debt restructuring because it will end up with less than in a Chapter 7 liquidation, according to a filing Friday with the U.S. Bankruptcy Court for the District of Delaware Thursday.

The creditor said the proposed Chapter 11 reorganization provides it with a distribution that is "substantially less valuable" than it would receive in a Chapter 7 case.

The bank said its claim is for $8.4 million but the plan proposes to give it equity worth about $4.2 million.

Parent SMC Holdings was offered $135 million in a cash offer from Castle Harlan in December, HVB noted, adding that Castle Harlan is still interested in acquiring the business.

If the company's case was converted to Chapter 7, the trustee would "seize the opportunity" to close a sale with Castle Harlan, the bank said in the filing.

If a Chapter 7 sale at $135 million occurred, it would produce "more than enough cash to pay off Class 1 claims, including HVB's, 100 cents on the dollar, the filing said.

Under Smarte Carte's prepackaged plan, the bank would receive an allocation of reorganized Smarte Carte's common stock. The remainder of the equity would be distributed to Black Diamond Commercial Finance LLC and General Electric Capital Corp., which would control the company.

HVB said the "minority interest" would be both "illiquid and subject to a discount because the reorganized company will be controlled by two investors having the ability to use the company for their own objectives."

The bank said "fair market value of an illiquid, minority common-stock interest in a closely held company is substantially less than the proportionate share of the entire company's equity value."

A combined hearing on the disclosure statement and confirmation hearing is scheduled for April 4.

Smarte Carte, a St. Paul, Minn., airport cart operator, made a prepackaged Chapter 11 filing on Feb. 11. Its case number is 05-10395.

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