Velocity Express unsecured creditors object to proposed DIP financing

By Alice Popovici

New York, Oct. 14 - Velocity Express Corp.'s committee of unsecured creditors oppose the company's motion for debtor-in-possession financing from Burdale Capital Finance, Inc., claiming that the terms do not allow Velocity to "adequately investigate and pursue other restructuring and sale opportunities," according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

On Sept. 24 the company was granted interim access to the $14 million facility. The final hearing is scheduled for Oct. 16.

"The proposed financing under the proposed postpetition credit agreement represents the work of an aggressive lender that on the one hand purports to be oversecured and on the other hand has demanded onerous and offensive terms from the [company] under a very short financing facility that allows only time to force a quick, insider-laden sale down the throats of the unsecured creditors," the motion states.

As previously reported, the DIP facility will mature on the earliest of Dec. 7, the asset sale closing date, 21 days after entry of the interim order if a final order has not been entered, confirmation of a plan of reorganization and occurrence of an event of default.

Interest will be Base rate plus 600 basis points, with a 4% floor.

Velocity is required to pay a $175,000 closing fee.

According to the objection, fees to be paid to the lender, under the postpetition credit agreement, including the closing fee, success fee and early termination fee, add up to more than $1 million.

"These fees alone are excessive, but when added to the interest being paid and the unquantified letter of credit fees, unused line fees, servicing fees and 'catchall' fees, the cost of borrowings under the postpetition credit agreement are egregious and unsupportable," the motion states.

Velocity Express, a regional delivery services provider based in Westport, Conn., filed for bankruptcy on Sept. 24. Its Chapter 11 case number is 09-13294.

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