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December 11, 2020 – With asset sale closed and funds depleted, the Court hearing the HDR Holding cases has issued an order converting the Debtors’ Chapter 11 case into a cases under Chapter 7 [Docket No. 413].
The Debtors' October 7th requesting motion [Docket No. 234] states, "The sale to Schramm II Inc. (the ‘Stalking Horse Bidder’ or ‘Purchaser’) closed on [October 2, 2019]. Now that the sale has closed, consistent with the DIP Financing Order and Sale Order, the Debtors have liquidated the collateral. The Debtors have no further sources of financing, have no sources of additional funds other than the potential proceeds of retained litigation, and lack the ability to fund ongoing administrative expenses that may be incurred after the closing of the sale. Therefore, the Debtors submit that converting the Chapter 11 Cases to cases under chapter 7 at this time is warranted and necessary.”
On September 17, 2019, the Court authorized the $10.3mn sale of substantially all of the Debtors' assets to Schramm II Inc. (the “Successful Bidder” or “Purchaser”). The Purchaser is an affiliate of 99.5% pre-petition shareholder, pre-petition lender and debtor-in-possession ("DIP") lender GenNx360 Capital Partners, L.P. ('GenNx360") [Docket No. 208]. On September 10, 2019, the Debtor notified the Court that, absent any further qualified bidders, a scheduled auction had been cancelled and that Schramm II Inc. had been designated the Successful Bidder. [Docket No. 195]. The asset purchase agreement (the "APA") is attached to the sale order as Exhibit 1.
As to consideration, the APA provides: “The aggregate consideration for the sale and transfer of the Acquired Assets (the “Purchase Price”) shall be not less than $10,300,000 plus the DIP as of Closing as follows: (a) credit bid or the assumption of the Indebtedness outstanding as set forth on Section 2.5 of the Disclosure Schedule; and (b) the assumption of Assumed Liabilities."
The Court order brings a bit more clarity to the aggregate purchase price: "Pursuant to the Stalking Horse Purchase Agreement, Purchaser credit bid an amount of DIP Obligations of $6,000,000 in principal amount and all accrued and unpaid interest thereon, assumed the Term Loan Ain the amount of $5,347,722.47, assumed $5,000,000.00 of Term Loan B and assumed other liabilities comprising the Purchase Price as set forth in schedule 2.5 to the Stalking Horse Purchase Agreement."
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