Summit Global convertibles holders object to proposed DIP financing

By Rebecca Melvin

New York, Feb. 1 - A group of Summit Global Logistics Inc. secured convertibles holders has objected to debtor-in-possession financing requested by the company, arguing its terms are designed to serve only pre-petition lenders to the detriment of remaining creditors, according to a filing Thursday with the U.S. Bankruptcy Court for the District of New Jersey.

The holders argue that the company hasn't satisfied its burden of demonstrating that secured holders are adequately protected, and they can't do so when the proposed DIP financing isn't commercially reasonable.

The interim hearing should be adjourned to enable secured holders to conduct expedited discovery on facts and circumstances surrounding the company's decision to approve the DIP financing, the filing states.

The proposed $2 million interim DIP financing from a total $5 million DIP hardly justifies elevating the liens relating to a $65 million loan to super-priority status and precluding alternative restructuring, the filing states.

The convertibles holders said the centerpiece of the company's Chapter 11 strategy is a "ratification agreement" loaded with extraordinary and onerous provisions.

The secured convertibles holders include Alexandra Global Master Fund Ltd., Bay Harbour Master Ltd. and affiliates; Camofi Master LDC, Dorset Management Corp. (an affiliate of Knott Partners LP and other entities), Gottbetter Capital Master Ltd., Harvest Capital LP and affiliates, JMG Capital Partners and JMG Triton Offshore Fund, Radcliffe SPC Ltd. on behalf of the class A segregated portfolio, and Silver Oak Capital LLC, who hold about 80% of secured notes.

On Jan. 30, Summit filed for bankruptcy constituting an event of default under Summit's senior secured credit facility and convertible notes, causing an automatic acceleration of $51 million in senior secured debt and giving convertible holders the right to force the company to redeem $95 million of notes.

Based in Kenilworth, N.J., Summit provides supply chain management services in the United States, Asia, Russia, the Commonwealth of Independent States, the Eastern Mediterranean, the Middle East and India. Its Chapter 11 case number is 08-11566.

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