Subscribe to glassBYTEs!

D(iamond)-Day Approaches

Over the next two days, an announcement is expected that will affect the entire industry. The business and assets of Kingston, Pa.-based Diamond Glass are scheduled to be sold via an auction process, following the company's filing for bankruptcy on April 1.

Tomorrow, the bids for the company, which were due at noon yesterday, will be opened in the offices of Young Conaway Stargatt & Taylor LLP in Wilmington, Del.

The U.S. Bankruptcy Court for the District of Delaware, where the case is being handled, previously had authorized Diamond's senior secured lender,Guggenheim, to arrange for any qualified bidder "certain financial accommodations … that would enable such qualified bidder, if it so desires, to borrow up to $25 million … but only if such bidder is determined to be the successful bidder after the auction."

In addition, the court authorized Diamond "the right, as they may reasonably determine to be in the best interests of their estates and in consultation with counsel to the Creditors' committee" to:

  • Determine which bidders the company deems to be qualified;
  • Determine which bids are qualified;
  • Determine which qualified bid is the highest and best proposal, along with the next highest and best; and
  • Reject any bid that is inadequate, insufficient, doesn't conform to the requirements of the order or Bankruptcy Code or is against Diamond's best interests.

Once the successful bid and bidder are chosen, the court will review the bid during a hearing on Friday, June 20, and, once approved, Diamond will sell all assets to that bidder, according to court documents.

During a May hearing, Diamond Glass counsel Michael Richman of Foley & Lardner advised the court that the company made some changes to the planned bid procedures "to accommodate concerns raised by one potential bidder [Belron]."

"We agreed to eliminate the option that we would have to conduct any part of the auction under a sealed bid procedure," Richman said. "In addition, we made clear that the parties who initially are entitled to receive bids will not disclose them to parties who are not initially entitled to receive bids, amplifying the confidentiality of the process and the fairness of it."

He added, "We also agreed to condition our exercise of discretion with the word 'reasonable.' And we agreed to provide reasonable access to management for all potential bidders prior to the bid deadline."

As of the May hearing, Diamond had received inquiries from more than 40 parties through its investment banker, National City, according to court documents.

" … We have high hopes that there will be lively and competitive bidding for the company," Richman said. National City had, at that point, contacted 178 potential buyers, had received 46 requests for confidentiality agreements and had sent executive summaries to 41 prospective purchasers, according to court documents.

The Guggenheim Factor
When Diamond announced its bankruptcy on April 1, it was also announced that part of its re-organization plan includes the consideration of the sale of its business to Diamond Glass's senior secured lenders, through their agent, Guggenheim Corporate Funding LLC. Through the auction process, in Guggenheim's bid, a significant portion of Diamond's debt to the company would be exchanged in part for ownership of the company. However, it was announced early on that other bidders would have the opportunity to "better the Guggenheim proposal," as noted in Diamond's April 1 press release, issued right after the filing.

During a hearing in early May, Richman advised the court that Guggenheim, Diamond's senior secured lender, had reduced its aggregate credit bid-lessening the amount others would have to surpass to succeed in the auction.

"[Guggenheim] has agreed that [it] will not credit-bid the portion of [its] claim that is covered by the guarantee from Kenneth Levine," he said. "So, there's approximately $10 million that [it] will not credit-bid … which then reduces [its] maximum from roughly $52 to roughly $42 million."

Richman also noted at that time that if Guggenheim does have the highest bid for the company, he's unaware how they will proceed with it after the sale.

"You asked me about what we know about whether Guggenheim is going to take people or not, and I have to be very careful on how I answer that question because the truth is, we really don't know. We haven't been told," he said.

"We believe that Guggenheim would try to carry on the business in substantially the same form as it is today, but no one's assured us of that … " he said. " … We hope, of course, that every single person continues to be employed by whoever the successor entity is if we effectuate a sale, but there's just no way of knowing that."

Could Diamond Be Belron's Next Acquisition?
While Guggenheim holds the spot as the senior secured lender (the "Stalking Horse bid," as court documents note), to date, the only prospective industry bidder who has publicly made known its interest in Diamond Glass is Belron. Company chief executive officer Gary Lubner expressed to™ during an exclusive interview on April 16 that the company "has interest" in purchasing Diamond. (CLICK HERE for related story.)

During an interview less than a week ago, Lubner declined to comment on what Belron's plans for Diamond might be, should it be successful in the winning process.

"We can't really comment at this stage, as we are getting toward the finishing line this week, and I can't even confirm whether we're going to be at the auction or not," Lubner said.

Belron has been actively involved in the case thus far. The bidding procedures were changed at Belron's request (see above), and the hearing was delayed for two weeks due to a motion originally made by Belron. (CLICK HERE for related story.) The motion for extension was sealed, however, as Belron noted that "the status of the discussions between [Diamond] and Belron is described and detailed throughout the Bid Extension Motion …"

Other Possibilities
While Guggenheim and Belron seem, at this point, to be the most likely players, based on the information provided in the case so far, as noted, more than 40 potential bidders requested information.

The winning bidder is scheduled to be chosen tomorrow, and a hearing for the court to review and approve the winning bidder will be held on Friday. Stay tuned to™ for more information as it becomes available.

Need more info and analysis about the issues?
CLICK HERE to subscribe to AGRR magazine.