TPC’s proposed DIP financing draws objection from some noteholders

By Sarah Lizee

Olympia, Wash., June 2 – TPC Group Inc.’s motion seeking approval of a $323 million debtor-in-possession facility drew an objection on Tuesday from an informal group of senior noteholders, according to court documents filed with the U.S. Bankruptcy Court for the District of Delaware.

The members of the informal group currently hold about 9.7% of the company’s 10˝% senior secured notes.

As previously reported, the proposed DIP facility is made up of up to $85 million in new money and a roll up of about $238 million of prepetition notes. This financing is to be provided by a majority of holders of the 10˝% notes and 10 7/8% notes.

The informal group of noteholders said the financing would harm the debtors’ estates and preempt litigation that will be central to the Chapter 11 cases. The non-consenting noteholders have also filed an adversary proceeding in the case, but the filing was sealed.

The group added that it has offered alternative financing with the same amount of new money, but on better overall terms and without a rollup.

“Nothing in the bankruptcy code authorizes roll-ups, and courts have uniformly disfavored this feature in debtor-in-possession financings for the good reason that roll-ups ‘immediately remove an important tool from the debtors’ arsenal, the ability to cram down the secured lender,’” the group said in its objection.

The group added that the proposed rollup is especially inappropriate because there is a strong likelihood that some of the notes being rolled up are actually junior to notes held by the objecting noteholders that the proposed DIP would prime.

Under the proposed DIP financing, interest is 11%, paid in cash. The financing contains certain milestones in line with a restructuring support agreement signed by the consenting noteholders and debtors. There would be certain conditions on the company’s ability to draw on the facility, and the debtors would not be able to make a final draw if they have not filed an RSA plan.

In comparison, the informal noteholder group’s financing would bear interest at 11%, with 3% paid in cash and an option to pay 8% in kind. This financing contains no milestones or covenants tied to treatment of prepetition claims.

“The members of the ad hoc group of usurping noteholders have exploited their majority position in the 10.5% notes to strong-arm the debtors to reject a superior postpetition financing proposal that is more favorable to the 10.5% noteholders as a whole (and, indeed, to all other junior creditors) to improperly shift value to themselves and away from the non-consenting noteholders,” the group said in its objection.

TPC Group is a Houston-based processor and service provider of value-added products derived from niche petrochemical raw materials. The company filed bankruptcy on June 1 under Chapter 11 case number 22-10493.

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