Carla's Pasta creditors object to cash collateral use, DIP financing

By Sarah Lizee

Olympia, Wash., Feb. 24 – Carla's Pasta, Inc.’s official committee of unsecured creditors objected to the company’s cash collateral use and debtor-in-possession financing, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Connecticut.

The committee claims the DIP and cash collateral motions improperly seek to use the Chapter 11 process only for the benefit of lenders.

The group also said that insufficient evidence has been supplied to determine whether the provisions of the motions are appropriate, and the provisions as they stand are internally inconsistent.

The committee also claims the carve-out mechanism for professionals is unclear and unworkable, and the budget contains several unclear provisions and seeks to pay pre-petition claims without proper authority or appropriate disclosure to the court and parties in interest.

As previously reported, Carla’s Pasta obtained court approval to access $750,000 of an up to $1.5 million debtor-in-possession revolving credit facility from pre-petition lenders BMO Harris Bank, NA and People’s United Bank, NA, according to an interim order filed Tuesday with the U.S. Bankruptcy Court for the District of Connecticut.

Interest on the facility will be 4.5%, and the facility will mature on the earliest to occur of a termination event and April 30.

Proceeds will be used for normal operating expenses.

The company also secured court approval to continue using the cash collateral of its pre-bankruptcy lenders.

A final hearing is scheduled for Feb. 26.

The South Windsor, Conn.-based pasta manufacturing company filed bankruptcy on Feb. 8 under Chapter 11 case number 21-20111.

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