Feb. 09, 2009 – The portions of the docket available on Friday, February 6, 2009 presented an incomplete picture of the intended direction of the Chapter 11 Bankruptcy filing of Fluid Routing Solutions Intermediate Holding Corp., Fluid Routing Solutions, Inc., Fluid Routing Solutions Automotive, LLC a/k/a Mark IV Automotive, LLC) and Detroit Fuel, Inc.

The docket is now complete through close of business on Friday. One of the last motions filed on Friday was:

“Motion to Approve Sale – Motion for Orders: (A)(I) Approving Bid Procedures Relating to Sale of the Debtors’ Assets Relating to the Fluid Routing Solutions Business; (II) Scheduling a Hearing to Consider the Sale; (III) Approving the Form and Manner of Notice of Sale by Auction; (IV) Establishing Procedures for Noticing and Determining Cure Amounts; and (V) Granting Related Relief and (B)(I) Approving Asset Purchase Agreement and Authorizing the Sale of Certain Assets of Debtors Outside the Ordinary Course of Business; (II) Authorizing the Sale of Assets Free and Clear of All Liens, Claims, encumbrances and Interests; (III) Authorizing the Assumption and Sale and Assignment of Certain Executory Contracts and Unexpired Leases; and (IV) Granting Related Relief Filed by Fluid Routing Solutions Intermediate Holding Corp.. Hearing scheduled for 2/17/2009 at 01:00 PM at US Bankruptcy Court”

Attached as Exhibit D to the Motion was an Asset Purchase Agreement dated February 6, 2009 between FRS Holding Corp and the main debtor in this bankruptcy. FRS Holding is owned by Fluid Routing Solutions Group LLC, the same ultimate owner as Fluid Routing Solutions has now. The agreed purchase price for the assets is “$11 million subject to adjustments described in the Agreement, plus the assumption of significant Assumed Obligations”.

Of concern is the statement that “The Sale of Acquired Assets will not include any of Debtors’ avoidance actions under chapter 5 of the Bankruptcy Code [bankruptcy preference claims] and the Debtors’ will have reasonable access to their books and records subsequent to the Sale so as to enable them to administer these bankruptcy cases.” That bankruptcy preference claims are being left with Fluid Routing Solutions causes distress. We would have expected those claims to go with the purchaser if the purchaser wanted to avoid disruption of its supplier relationships. We also have no idea what the balance sheet looks like so there is no way to assess the potential for bankruptcy preference claims.

For those interested or concerned about what is going on, it is important to get on top of the proceedings. The train has already left the station and it is a bullet train. There are some cases, and we are not saying this is or is not one of them, where everything is over but the crying before suppliers even know what happened.

The proposed schedule is:

Bid Procedures Hearing Date: February 17, 2009 at 1:00 p.m.
Bid Procedures Objection Deadline: February 16, 2009 at 12:00 p.m.
Sale Hearing Date (Proposed): March 12, 2009 at TBD
Sale Objection Deadline (Proposed): March 9, 2009 at 4:00 p.m.

The bottom line is that from a supplier perspective the case appears to be gaining in complexity. It appears that there may be risks here for suppliers, but at this time it is not possible to understand them much less quantify them.

In the prior post, we talked about the 503(b)(9) administrative priority payment motion. That motion was granted. Given the information revealed in the motion regarding sale, certain of the provisions of the proposed “Trade Agreements” (discussed in the prior post) are of even greater concern.