SP Newsprint lenders offer $145 million for substantially all assets

By Caroline Salls

Pittsburgh, July 20 - SP Newsprint Holdings LLC requested court approval of the proposed $145 million sale of substantially all of its assets, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

The sale is subject to the receipt of higher or better offers under a court-supervised auction process. SPN AcquisitionCo, LLC, an entity formed and owned by SP Newsprint's pre-bankruptcy lenders, is the stalking horse bidder.

Funding concerns

According to the motion, continuing funding concerns require the company to bring the asset sale process to a "prompt conclusion."

Specifically, SP Newsprint said its current financial projections indicate that it will likely exhaust availability under its debtor-in-possession credit facility and could face a liquidity crisis in the near future absent a cash infusion from either new lenders or an asset sale.

Because the company doubts that it could obtain any additional or other new funding at this point, SP Newsprint said it is crucial that it complete a sale to a buyer willing to inject the necessary new capital into the business.

The company said the only parties to date willing to enter into a binding agreement to acquire all of the purchased assets have been the pre-bankruptcy lenders, through a credit bid of a portion of their secured claims.

Stalking horse terms

Under the stalking horse bid, the lenders would credit bid their claims for a portion of SP Newsprint's pre-bankruptcy credit facility and provide enough cash to pay all outstanding debtor-in-possession credit facility obligations.

The proposed buyer would also assume or otherwise satisfy a substantial amount of the company's liabilities, including up to $27.9 million in administrative priority claims, all liabilities arising under any assumed employee benefits plan, amounts owed for all pre-bankruptcy wages and salaries and all transfer taxes payable as a result of the sale and the assumption of the liabilities.

The stalking horse bidder has also agreed to either pay or find funding to pay up to $2 million of assumed unknown administrative priority claims, according to the motion.

Competing bids are due by 4 p.m. ET on Aug. 6 and must include a 5% deposit.

SP Newsprint has asked the court to schedule an auction for Aug. 9. The auction would be held if SP Newsprint receives one or more qualified competing bids for the assets.

The company said the sale is expected to close in late August.

DIP loan amendment

In addition, SP Newsprint requested court approval to amend its DIP loan agreement to increase the maximum permitted borrowings under the DIP facility to cover expenses associated with the asset sale and to expand the carve-out provided under the final DIP loan order.

Under the asset purchase agreement, SP Newsprint said the satisfaction of administrative expense claims would require an increase of the maximum borrowings under the DIP loan agreement to about $60 million.

In connection with sale negotiations, the company said the DIP loan agreement amendment would increase the maximum commitment amount to cover the company's obligations for closing date administrative priority claims and cure costs.

The amendment also expands the definition of the carve-out to include all unpaid employee wages, salaries and benefits, capped at $2.1 million.

A hearing on the bid procedures and the DIP loan amendment is scheduled for July 27.

SP Newsprint, a Greenwich, Conn.-based newsprint producer, filed for bankruptcy on Nov. 15, 2011. Its Chapter 11 case number is 11-13649.

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