Former Borden Dairy gets court OK of settlement with committee, ACON

By Sarah Lizee

Olympia, Wash., Nov. 18 – BDC Inc., formerly Borden Dairy Co., and its official committee of unsecured creditors received court approval of a settlement agreement between the debtors, the committee and ACON Dairy Investors, LLC, according to an order filed Monday in the U.S. Bankruptcy Court for the District of Delaware.

“To conclude these cases, one of the last remaining hurdles is a potential fight with a former lender, KKR, as holder of a large unsecured deficiency claim, over whether the settlement provides adequate consideration to the estates in exchange for proposed releases in favor of an equity holder, ACON, and the debtors’ current and former managers, directors, and officers,” the motion said, as previously reported.

In October, the debtors, the committee and ACON concluded an extensive mediation and reached a compromise under which ACON has agreed to contribute substantial consideration to the estates in exchange for releases in favor of itself, its related parties, some current and former managers and directors and the debtors’ current and former officers.

Specifically, ACON has agreed to contribute consideration of at least $1.4 million, consisting of $1 million in cash and the withdrawal of claims including an administrative claim of about $400,000.

“The settlement, if approved, should materially increase recoveries by unsecured creditors and pave the path to confirm the liquidating plan and conclude these cases,” the motion said.

BDC and the committee of unsecured creditors said that while KKR participated in the mediation, it does not support the settlement, contending that there are “valuable claims, most notably the direct claims of KKR against the ACON releasees that KKR transferred to the estates in connection with the sale, that should be pursued on the estates’ behalf against the ACON releasees.

“KKR insists that the liquidating plan transfer all potential claims against the ACON releasees to a litigation trust, including the contributed KKR claims, and that the estates fund the further investigation and litigation of those potential claims rather than distribute those proceeds to general unsecured creditors.”

BDC and its unsecured creditors disagree with KKR and believes that funding a litigation trust to pursue potential claims that have already been evaluated and discussed will diminish and exhaust the estates’ limited remaining assets, which would make it unlikely the debtors could confirm any plan and provide a distribution to general unsecured creditors.

Borden is a Dallas-based dairy company. The company filed bankruptcy on Jan. 5, 2020 under Chapter 11 case number 20-10010.

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