Secured Creditors Committee Object to Proposed Financing
The official committee of secured creditors has filed an objection
to Diamond Glass' financing motion and the terms of the company's
proposed financing. In the objection, filed yesterday, the creditors
claim that "the Debtors have not met their burden of establishing
a legally sufficient basis for allowing extraordinary relief in
the form of the proposed roll-up of $34 million of Pre-Petition
Deb into Post-Petition Debt." In addition, the creditors claim that
Diamond's proposed financing "should not provide that Guggenheim
is exempt from the equitable doctrine of marshaling, particularly
where, as here, the other asset from which Guggenheim may seek payment,
is $10 million cash provided by the Debtors' largest equity holder
as collateral which is believed to be currently held by Guggenheim."
Within the objection, the creditors also claim that because Diamond
noted in the April 2 hearing that its busy season runs from April
through September (CLICK
HERE for related story), "it is possible that [it] will be able
to operate until a sale closes without the necessity of the debtor
in possession financing." Therefore, the creditors argue, the company
"cannot satisfy [its] burden of proof to justify the roll-up of
Pre-Petition Debt into the DIP facility."
In addition, the creditors allege that the roll-up (of the debt)
will not benefit the general creditor body.
"The roll-up would maximize Guggenheim's return in these cases
by giving it almost unfettered control," the creditors write. "
Moreover, if the Court allows the roll-up, Guggenheim would be entitlted
to additional interest payments from the Debtors … totaling approximately
The document also notes that Guggenheim "apparently has the ability
to obtain payment of approximately $10 million from the largest
equity holder, Kenneth Levine" (CLICK
HERE for related story).
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