By Jacqueline Palank
Of DOW JONES DAILY BANKRUPTCY REVIEW
A group of Dayton Superior Corp. (DSUP) bondholders is objecting
to the company's proposed $165 million bankruptcy loan from General
Electric Capital Corp. because they're offering to provide a
"superior" financing package.
According to the group, which together holds more than 60% of
Dayton Superior's outstanding bond debt, Dayton Superior is wrongly
proceeding with a financing package that's "unfair" to its
creditors despite the group's efforts to assist the company with
its restructuring.
That includes an offer to provide a better debtor-in-possession,
or DIP, loan to fund the company's operations as it restructures,
the bondholders added.
"The bondholders' DIP proposal actually offers more favorable
economic terms than the GE DIP for which the debtor seeks
approval," they said in court papers Monday. "The bondholders' DIP
proposal is superior to the GE DIP proposal in every material
respect."
Specifically, bondholders OCM Principal Opportunities Fund IV
LP, Whippoorwill Associates and Solus Alternative Asset Management
take issue with the fact that the proposed DIP loan "rolls up"
Dayton Superior's $111 million in existing debt on a pre-bankruptcy
loan from GE Capital into the $165 million DIP loan.
According to the bondholders, who hold $100 million of the
$161.5 million in outstanding 13% senior subordinated notes due
2009, such a roll-up is "unnecessary" because they're offering to
provide an alternative financing package without any roll-ups.
They also warned that the roll-up will elevate GE Capital's $160
million-plus claim to a high priority, forcing Dayton Superior to
confront a hefty claim that must be in paid in full before it may
exit bankruptcy protection.
"The roll-up is also likely to hinder the debtor's eventual
emergence from bankruptcy as the debtor will face the hurdle of
repaying $160 million directly to GE prior to any exit from Chapter
11," the bondholders said.
The $55 million DIP loan the bondholders are offering, they say,
not only lacks a roll-up but also provides increased liquidity,
lower pricing, greater flexibility for Dayton Superior's exit from
Chapter 11 protection and more flexible covenants.
The bondholders' loan wouldn't put their liens at a higher
priority than Dayton Superior's existing secured lenders, they
said, and the loan plan already has the support of the lenders who
provided the company's $100 million pre-bankruptcy term loan.
Those lenders - DK Acquisition Partners LP and Silver Point
Capital LP - expressed their support for the bondholders' loan on
Tuesday when they filed their own objection to the GE Capital
financing proposal. They say the bondholders' loan provides the
same amount of money while presenting fewer obstacles.
"It commits the same $55 million of new money to fund the
debtor's operations, with fewer conditions on, and more flexibility
with respect to, availability of these funds than under the GE DIP
proposal," they said.
What's more, they added, is that the 7.5% interest rate on the
bondholders' loan is about half of GE Capital's 15.25% interest
rate.
At a hearing Tuesday, the U.S. Bankruptcy Court in Wilmington,
Del., was slated to consider allowing Dayton Superior to draw on a
portion of the loan.
The Dayton, Ohio, company filed for Chapter 11 protection on
Sunday.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection.)
-By Jacqueline Palank, Dow Jones Daily Bankruptcy Review;
202-862-6615; jacqueline.palank@dowjones.com