Boomerang committee says DIP financing is a ‘brazen’ takeover attempt

By Kali Hays

New York, July 13 – Boomerang Tube LLC’s official committee of unsecured creditors objected to final approval of the company’s proposed $145 million of debtor-in-possession financing, according to a July 13 filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee said it regards the proposed financing, provided by Black Diamond Capital Management, LLC and Access Industries, Inc., “as the first prong in [the lenders’] attack against general unsecured creditors,” and a “brazen” effort to complete a debt for equity swap.

Black Diamond is the company’s majority term loan lender and Access is the private equity sponsor controlling more than 80% of the Boomerang’s equity and has four employees on the company’s seven-member board of directors.

“In implementing their scheme, Access, with the implicit sanction of the board it had installed, and Black Diamond checked nearly every single box in the (now very transparent) playbook on how to use Chapter 11 in place of state law collateral foreclosure rights and now seek to chill pursuit of any alternative restructuring with dramatically overreaching protections for a supposed ‘new money’ DIP loan,” the objection stated.

The committee also claims that, though Boomerang is overleveraged and has been affected by the downturn in the oil market, the company is only experiencing “a temporary ‘trough’ in demand for the debtors’ products due to a short-term decline in spending by oil exploration and production companies.”

The committee says that Black Diamond and Access are aggressively pursuing a loan-to-own takeover and that Boomerang has already been “overrun” by the lenders while they “refuse to finance a real process.”

Moreover, the committee alleges that certain lender parties are company insiders, the DIP agreement includes overbroad releases, the period for it to conduct a full investigation into the lenders’ actions is too short and the financing “is simply too expensive.”

As previously reported, the DIP financing is comprised of a $60 million term loan and additional access to up to $85 million in revolving loans and letters of credit.

The committee said the financing will give the lenders “effective control of these cases,” and it must be rejected.

Boomerang Tube is a St. Louis-based producer of oil country tubular goods and line pipe that filed for bankruptcy on June 9. The Chapter 11 case number is 15-11247.

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