It appears there are a few flies in the ointment of the “quick-sale” process put in place for the assets of the largest regional sporting goods retailer in the northwest. Qualified bids were originally due on Friday, March 20 in the Chapter 11 bankruptcy case involving G.I. Joes Holding Corp. and G.I. Joes, Inc., the legal entities at the center of the meltdown of retailer Joes Sports, Outdoors and More.
A “Stalking Horse” bidder was expected to be named by Tuesday of this week at the latest. An auction of all G.I. Joes assets was initially scheduled for March 30, 2009. But not so fast, said the recently appointed Committee of Unsecured Creditors, which is crying foul in the banks efforts to liquidate quickly to recoup its money.
The official Committee of Unsecured Creditors, which was named on March 16 and includes officials from Raleigh America, TRF Capital, VF Outdoor, Columbia Sportswear, Rocky Brands, Under Armour, and All Sports Supply, immediately filed an objection with the U.S. Bankruptcy Court in Delaware last week to the entry of interim and final orders authorizing Joes to obtain post-petition financing and the use of cash collateral during the bankruptcy process, among other issues. The CUC also objected to the approval of bid procedures, scheduling of the auction and other matters related to the quick sale of the retailers assets. They also filed a cross-motion for an order converting the Joes Chapter 11 cases to Chapter 7 cases.
In its motion, the CUC argued that it is “gravely concerned” with the Interim DIP (Debtor in Possession Financing) Order, suggesting that it “clearly serves as the backbone for the Lenders scheme to utilize these chapter 11 cases for their sole and exclusive benefit and without regard to its disastrous effect on administrative, priority and general unsecured creditors.”
The filing reminded the Court that Joes, in its bankruptcy filing, had “conceded that a reorganization of all or part of the business is not possible,” and “now seek to placate the [DIP] Lenders with a sale process providing little time or financial ability to solicit and negotiate offers to sell the business as a going-concern.” The CUC further asserted that “the Interim DIP Order is crafted to provide the Debtors with access to severely limited borrowings that would achieve little more than to support a liquidation of the Debtors assets, enable the Senior Lenders to siphon substantial sums of money out of the Debtors estates, and grant the Lenders liens and superpriority claims on all of the Debtors previously unencumbered assets.”
The Committee suggested in its filing that since it was not appointed until after the disputed orders were entered on March 9, the objections and cross-motion were their first opportunity to express the concerns of unsecured creditors, most of which are industry vendors.
Late last week, the Court revised the dates for the sale and bid procedure, moving the initial date for qualified bids to March 27, with a “Stalking Horse” bidder named no later than Tuesday, March 31. The amended order also includes a credit bid date of April 6. The auction of all assets will now be held on April 7, 2009.
