Contech U.S. LLC and two affiliates, MAG Contech, LLC and Contech, LLC filed bankruptcy in Michigan on January 30, 2009 – another victim of the automotive sector downturn. The most unique aspect of the case has been the willingness of 5 automotive customers (Delphi, Ford, BMW, Linamar and Automotive Components Holdings) to provide $7,200,000 DIP financing to keep Contech manufacturing components until a buyer can be found. For the suppliers to and other unsecured trade creditors of Contech, there never seemed to be much to try and salvage. This was confirmed in a March 26, 2009 filing by Contech.
In an objection to a motion of the creditors’ committee to hire a financial adviser, Contech states:
As the Court is aware, the Debtors’ secured lenders appear to be significantly under-secured. Thus, it appears that a recovery to the unsecured creditors is unlikely. Additionally, the Debtors’ lenders and counsel for the Committee are all closely monitoring the Debtors’ actions to ensure that the Debtors are maximizing the value of their estates. Given these facts, the Debtors have concerns as to whether the cost associated with the Committee’s retention of a financial advisor will outweigh benefit or value that such advisor will provide in these cases. [Emphasis added]
In the south, we call this the “no dog in the hunt” objection.
Frankly, we are suprised that the creditors’ committee was able to find a professional to sign up for a gig where administrative insolvency (and hence non-payment) seems to be a possiblity. Of course, if there is a big bank of bankruptcy preference claims then, once again, bankruptcy preference recoveries will fund a Chapter 11 “reorganization”.