Knotel: U.S. trustee objects to bid procedures, stalking horse deal

By Sarah Lizee

Olympia, Wash., Feb. 10 – Knotel, Inc.’s motion for approval of the bid procedures for substantially all of its assets and entry into a stalking horse agreement drew an objection from Regions 3 and 9 U.S. trustee Andrew R. Vara, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

Vara said the proposed timetable does not provide enough time for the debtors to market the assets for sale, given that they did not conduct an effective marketing process pre-petition.

In addition, the U.S. trustee said the proposed bid protections are not designed to benefit the debtors’ estates.

“Rather, the bid protections are constructed to protect Digiatech’s fully-entrenched acquisition effort, an effort underscored by Digiatech’s purchase of the debtors’ first- and second-lien positions,” Vara said.

“The bid protections are especially unreasonable considering that Digiatech used its power as a secured lender to require the debtors to pay $1 million of its diligence costs (to an advisory affiliate of Digiatech) prior to the filing of these cases.”

As previously reported, the company filed a motion requesting approval of the stalking horse asset purchase agreement with Digiatech, an affiliate of Newmark Group, Inc., which has a 3% termination fee and a $500,000 expense reimbursement, according to court documents.

Under the proposed bidding procedures, bids would be due by 4 p.m. ET on Feb. 28, an auction would be held on March 2, and a sale hearing would be held on March 4.

Competing bids must exceed the stalking horse bid, plus the bid protections and $500,000.

New York-based Knotel operates a flexible workspace platform that matches, tailors and manages space for customers. The company filed bankruptcy on Jan. 31 under Chapter 11 case number 21-10146.

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