George Washington Bridge lenders blast new stalking horse motion

By Sarah Lizee

Olympia, Wash., July 1 – George Washington Bridge Bus Station Development Venture, LLC’s senior lenders, George Washington Bridge Bus Station and Infrastructure Development Fund LLC and New York City Regional Center, LLC objected to the company’s motion seeking court approval to replace the current stalking horse bidder for substantially all of its assets, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The proposed new stalking horse bidder is JMB Capital Partners Lending, LLC, the company’s debtor-in-possession lender. Monarch Alternative Capital LP originally served as stalking horse bidder.

The senior lenders said the original stalking horse bid with Monarch would have provided up to about $100 million of consideration to the debtor and its creditors in the aggregate, including the repayment in full of the DIP loan, funding for administrative expense claims and wind-down costs, and the assumption by Monarch of $72 million of debt owed to George Washington Bridge Bus Station and Infrastructure Development Fund.

“Although the senior lenders were disappointed by the loss of the Monarch transaction, they were also encouraged by the recent lifting of all Covid-19 related restrictions in New York City and the opportunity for the debtor to remarket its property in an improving commercial real estate market,” the lenders said in their objection.

“However, without remarketing the property to potential stalking horse bidders, on the same day it terminated the Monarch transaction, the debtor informed the senior lenders it would be entering into a stalking horse agreement with the DIP lender.”

The debtor now wants approval of a fast-tracked credit bid stalking horse agreement that contemplates the sale of its assets to the DIP lender in a transaction that, despite its headline price of $43.5 million, may actually provide under $23 million in consideration, merely a waiver of the DIP loan and some limited funding for administrative and wind-down expenses, the senior lenders said.

“The artificially low floor set by the DIP credit bid combined with the debtor’s proposed truncated bidding process over the summer, without the debtor obtaining any clarity on the closing cost issues that plagued the Monarch transaction, poses a significant risk to the estate maximizing value, and may result in the DIP lender owning the property at a bargain price,” the lenders added.

As previously reported, the debtor, Monarch, the Port Authority of New York and New Jersey and New York City Regional Center LLC had worked to negotiate documents relating to the asset purchase agreement, including a ground lease amendment that would modify the economics of the ground lease in some respects, and the ground lease estoppel, which Monarch insisted could only reference some defaults.

Throughout those negotiations, Monarch said it was unwilling to close on a sale unless the ground lease amendment and clean ground lease estoppel were delivered.

Meanwhile, the port authority held its position that it was not obligated to modify the ground lease.

JMB later approached the debtor and indicated it was willing to serve as stalking horse bidder in lieu of Monarch by, among other things, credit bidding all of the debtor’s debt to it under the DIP facility.

The DIP lender also said it would not condition any sale on the closing conditions that made Monarch unlikely to close on the sale. JMB sent the debtor a term sheet on June 14.

The company terminated the previous stalking horse agreement on June 23, and signed the new stalking horse deal with JMB on June 25.

George Washington Bridge Bus Station Development Venture is a Reston, Va.-based development company. The company filed bankruptcy on Oct. 7, 2019 under Chapter 11 case number 19-13196.

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