Teligent creditors object to conversion motion, seek trustee

By Sarah Lizee

Olympia, Wash., March 7 – Teligent, Inc.’s motion seeking conversion of its Chapter 11 bankruptcy case drew an objection on Monday from the official committee of unsecured creditors, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee said the conversion motion is not in the best interests of the estate or any of the company’s creditors, other than lenders Ares Capital Corp. and ACF Finco I LP.

“There is no mystery as to how or why these cases have reached the point where the debtors seek their conversion to Chapter 7,” the committee said in its objection.

“The lenders have realized all of the upside they possibly can obtain from the Chapter 11 process. The debtors have closed the sales of all of their assets, and, if nothing changes, the lenders will receive all of the sales proceeds.”

The committee said that at this point, the Chapter 11 cases hold only risk for the lenders given that the committee has filed a motion requesting standing to pursue numerous claims against the lenders.

The committee’s proposed complaint includes claims that the lenders unlawfully drained the debtors’ cash reserves just before the debtors’ bankruptcy filing, only to then re-lend those same funds back to the debtors through a post-petition credit facility; and the lenders’ liens attached to millions of dollars of unencumbered value just two days before the petition date and constitute avoidable preferences.

“If the conversion motion is granted, however, it will stop the lender claims in their tracks,” the committee said.

Conversion would force the automatic dissolution of the committee before it has “duly filed an adversary proceeding” in line with the final debtor-in-possession order, which would in turn prevent any party from pursuing the lender claims.

The committee said the lenders have demanded that the debtors convert the case before the standing motion can be heard.

“The timing of the conversion motion makes its purpose abundantly clear. Knowing that the standing motion is set for hearing on March 23, the lenders coerced the debtors into seeking an earlier conversion by refusing to consent to the use of cash collateral past March 20,” the committee said.

“The lenders take this position even though the debtors are only using cash collateral right now for purposes of liquidating the few remaining assets against which the lenders claim a lien.”

In addition to the objection, the committee filed a motion for appointment of a Chapter 11 trustee.

The committee said appointment of a Chapter 11 trustee would relieve the debtor’s management of their duties without destroying the claims that the committee has uncovered.

The group also said that appointment of a Chapter 11 trustee would potentially make it more likely that the debtors’ estates and unsecured creditors will receive the benefit of the claims the committee has identified against Hikma Canada Ltd. concerning the extent of the trade debt Hikma assumed in connection with its purchase of the debtors’ Canadian assets.

A hearing on the conversion motion is scheduled for March 9.

Teligent is a Buena, N.J.-based specialty generic pharmaceutical company. The company filed bankruptcy on Oct. 14 under Chapter 11 case number 21-11332.

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