The Stant bankruptcy is structured as a 363 Sale to an affiliate of an insider (i.e. a current equity holder). For suppliers this will be a case of suppler “haves” and supplier “have nots”. Each supplier should determine its classification as soon as possible. This bankruptcy likely will move fast – 45 days and the 363 sale will be done. Based on the limited financial information provided to date, administrative insolvency is a risk. So for some suppliers who don’t pay attention, this may be a bankruptcy that just keeps on giving.
Critical Vendor Motion in Arclin Bankruptcy Raises Questions for 503(b)(9) Claimants
The first day motion of Arclin US Holdings Inc. and its 6 co-debtor affiliates (“Arclin”) to pay “critical vendors” illustrates how dramatically the “critical vendor” concept can vary from industry to industry. The motion also illustrates how a “critical vendor” motion can be used by a debtor to extract post petition concessions from suppliers holding administrative expense claims under Section 503(b)(9). Finally, the case presents an interesting situation where a debtor argues in favor of inclusion of freight costs in 503(b)(9) claims.
Stant Corporation – Largest Unsecured Bankruptcy Creditors
Stant Parent Corp, as lead debtor, and its 5 affiliated Debtors (“Debtors”) have requested authority to file a consolidated list of the 20 largest unsecured creditors for itself (the “Top Unsecured Creditor List”) in lieu of a separate list for each of the Debtors. While the trade debt numbers on the Top Unsecured Creditor List are substantial, trade debt claims are small compared to unsecured debt (including preferred stock) and accrued interest and dividend claims.
See the Stant Corporation <a title=”DOCSHEETS™ – BANKRUPTCY CASES” href=”http://www.burbageweddell.com/docsheets-bankruptcy-cases/”>Docsheet™ Report</a> for subsequent <a title=”Stant Corporation Bankruptcy” href=”http://www.burbageweddell.com/docsheets-bankruptcy-cases/stant-docsheet/”>selected docket entries in the Stant Corporation bankruptcy proceedings</a>.
Stant Corporation Bankruptcy – Debtors and Petitions
See the Stant Corporation Docsheet™ Report for subsequent selected docket entries in the Stant Corporation bankruptcy proceedings.
Stant Corporation and 5 affiliated entities (”Debtors”) filed a petitions in Bankruptcy Court for the District of Delaware for relief under chapter 11 of title 11 of the United States Code. The Debtors are leading developer and manufacturer of automotive fuel systems, fuel caps, radiator caps and thermostats. The Debtors products are sold in the U.S. and Canada through wholesale automotive parts distribution outlets and to automotive OEMs.
The bankruptcy looks like a classic 363 sale/stalking horse bidder transaction that will result in the clear split of supplier “haves” and supplier “have nots.” A critical vendor motion and attached sample trade agreement show that even for the supplier “haves” there are going to be some tough decisions.
Arclin – Largest Unsecured Bankruptcy Creditors
Arclin US Holdings Inc., (“Arclin Holdings”) has requested authority to file a consolidated list of the 30 largest unsecured creditors of the Arclin and its affiliated Debtors (the “Top Unsecured Creditor List”) in lieu of a separate list for each of the Debtors. All of the claims were listed as trade debt and none of the claims were identified as disputed.
Arclin Group Bankruptcy – Debtors and Petitions
Arclin US Holdings Inc. and 6 affiliated entities (”Debtors”) filed a petitions in Bankruptcy Court for the District of Delaware for relief under chapter 11 of title 11 of the United States Code. Certain of the Debtors’ non-debtor Canadian affiliates (the “CCAA Debtors” and, collectively with the Debtors, the “Arclin Group”) contemporaneously filed for court protection in Canada from their creditors under Canada’s Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the “CCAA”), in the Ontario (Commercial List) Superior Court of Justice (the “Canadian Court” and the filing, the “Canadian Proceeding”).
The Arclin Group develops, produces, and markets bonding and surfacing products and technology for the engineered materials markets. The resin bonding products are used predominantly in the manufacture of residential and industrial construction materials such as particleboard, medium density fiberboard, plywood and oriented strandboard. According to the affidavit filed in support of its first day motions, the Arclin Group has approximately 25% of the resins market in the United States and Canada.
PACA, PASA Issues Complicate Bashas First-Day Motions
The Perishable Agricultural Commodities Act (“PACA”) and its sister statute “Packers and Stockyards Act (“PASA”) provide federal statutory lien protection to vendors of fresh foods and bulk meat. In the Bashas’ bankruptcy, pre-petition supplier claims covered by these two acts are substantial. Bashas’ estimates the combined claims will exceed $6.8 million — $4.2 million in pre-petition claims potentially subject to PACA and $2.6 million in pre-petition claims potentially subject to PASA . Bashas’ asked for blanket bankruptcy court approval to allow (but not require) the debtor to pay PASA and PACA claims. The pre-petition secured lenders have said “Not so fast”. Our first question: “Why are the pre-petition secured lenders concerned about this to begin with?”
Bashas Inc. Bankruptcy – 30 Largest Unsecured Creditors
Bashas’ Inc. and 2 affiliated entities (”Debtors”) filed petitions in Bankruptcy Court for the District of Arizona for relief under chapter 11 of title 11 of the United States Code. Bashas’ is the lead debtor (case no. 09-16050) and filing concurrently were affiliates Bashas’ Leaseco, Inc. (case no. 09-16051) and Sportsman’s L.L.C. (case no. 09-16052). Bashas is a family owned supermarket chain with 158 locations, primarily in Arizona. It is one of the nations largest privately held grocers. Published reports state that Bashas’ has more than 20,000 creditors. The top 30 unsecured creditors as identified by Bashas’ Inc. are listed below:
Direction Change Likely Cause of Grede Foundries Bankruptcy Delay
The hearing of the Grede Foundries first day motions is now on its third continuance – July 1 to July 2, July 2 to July 6 and now July 6 to July 13. While it is unusual for a hearing on first day motions to be continued 3 times and extended for 13 days, we believe that this is understandable given the switch in direction of this bankruptcy when DDJ Capital Management, LLC (”DDJ”) jumped in front of the 363 sale strategy the Debtor had planned. In the meantime, certain other aspects of the case go forward.
How Did Lear Decide Which Suppliers are its Critical Vendors
Lear Corporation and co-debtor subsidiaries (“Lear”) have estimated that they collectively have 1,600 vendors with outstanding prepetition claims. Lear has identified 214 of these vendors as “critical vendors”. As part of its first day motions, Lear has requested an order from the Bankruptcy Court authorizing Lear to pay up to an aggregate of $50,100,000 ($25,050,000 pursuant to an interim order and up to an additional $25,050,000 pursuant to a final order) of prepetition claims held by these 214 “critical vendors.” In the Lear bankruptcies and in other bankruptcies where similar motions have been filed, suppliers (and their lenders and stakeholders) repeatedly are asking: “What is a ‘critical vendor’ and what are the chances of my company being one?”