Klausner Lumber Two LLC – Austrian Timber Giants Battle (Again) at Auction with Binderholz Bid of $83.4mn Topping Opener by More than $50.0mn

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December 10, 2020 –  Further to a November 19th bidding procedures order [Docket No. 421] and the conclusion of a December 10th auction, the Debtor designated Binderholz Enfield LLC as the Successful Bidder ($83.4mn cash bid) in a sale of substantially all of the Debtor’s assets, with stalking horse Mayr-Melnhof Holz Holding AG (“MM-H”) designated as the back-up bidder [Docket No. 481]. 

MM-H had paced bidding with a $30.0mn cash offer memorialized in an early November asset purchase agreement, with that bid ultimately replaced by a $32.0mn baseline bid from Binderholz which was notified to the Court on December 7th.

The Successful Bidder is an affiliate of Austria' Binderholz Group ("Binderholz").

This was the second time in recent months that the two Austrian timber companies had faced off over a Klausner Trading USA asset. On September 1st, further to an August 21st auction and an August 31st sale hearing, the Court hearing the Klausner Lumber One cases issued an order approving the $61.0mn sale of those assets to Binderholz with MM-H (which describes itself as "the leading supplier of glued laminated timber in Europe") again designated as the back-up bidder.

In a press release announcing its present acquisition, Binderholz noted (and gloated): "With this acquisition, Binderholz becomes the largest European sawn timber producer. With its 9 sawmills in Austria, Germany, Finland and the USA, binderholz has a capacity of approximately 8.5 million solid cubic meters of roundwood, from which 5 million m³ of sawn timber and from which 3.6 million m³ of solid wood products are produced. 

The North Carolina site is located in one of the best growing areas for the 'Southern Yellow Pine' species, which is in high demand in the USA. Log availability from the local area is sufficient and sustainable. In addition, the southeast of America is one of the most populous states, so that sales in this region are correspondingly high." 

A copy of executed version of Binderholz APA attached as Exhibit A to the notice.

The Debtor's notice provides: "In accordance with the Bidding Procedures and Bidding Procedures Order, an Auction was held December 10, 2020. The Debtor, in consultation with the Consultation Parties, selected Binderholz as the Successful Bidder. Binderholz’s final offer for the Purchased Assets as stated on the record at the Auction was $83.4mn in cash, plus those assumed liabilities (including the County Deferred Obligation in the maximum aggregate amount of $3,287,500, subject to, and in accordance with, the Contingent Obligations Rider) as set forth in Binderholz’s modified Asset Purchase Agreement (the 'Binderholz APA'), and this was declared the highest and best offer, and accepted by the Debtor." 

Back-up bidder MM-H’s final offer was $82.9mn (inclusive of a $900k credit for bidder protections), plus assumed liabilities.

Background 

On December 7th, the Debtor filed a notice of virtual auction [Docket No. 468] which identified Binder Beteiligungs AG as the baseline bidder at the auction.

On November 19th, the Court hearing the Klausner Lumber Two case issued an order approving the Debtor's stalking horse agreement with Mayr-Melnhof Holz Holding AG (the “Stalking Horse Purchaser”), further to which the Stalking Horse Purchaser agreed to pace a section 363 auction/sale process with an up to $30.0mn bid. The Stalking Horse Bidder is a Leoben, Austria-based subsidiary of F. Mayr-Melnhof-Saurau Industrie Holding GmbH which operates sawn timber and processing divisions, and further to recently completed acquisitions "the leading supplier of glued laminated timber in Europe." 

The Debtor's bidding procedures motion reads: “As part of the Debtor’s efforts to find a value-maximizing transaction for its assets, the Debtor has filed an application to engage Cypress Associates (‘Cypress’), an experienced investment banker, to canvass the market for interested buyers.

Cypress began marketing KL2 in April 2020, prior to the filing of the bankruptcy petition. During this initial marketing process, Cypress organized a large virtual data room (‘VDR’) that now contains operational, legal, financial and descriptive information. Since the start of the marketing process, Cypress has reached out to approximately 75 prospective strategic buyers and 192 prospective financial buyers, several of whom contacted Cypress after seeing the filing of the petition. So far, approximately 44 prospective buyers have requested or signed NDAs so that they can secure access to the VDR.

The Debtor has no ability to render the plant operational — it would require a substantial investment in additional infrastructure and equipment, working capital, re-hiring and hiring new employees and undertaking necessary maintenance and repairs. A great deal of post-petition financing could be required to do this, all in the midst of the COVID-19 downturn. The Debtor and its professionals have determined, and it is doubtful that any creditor would contest, that a sale is the best way to monetize the Debtor’s assets.

In furtherance of this, the Debtor has filed this Motion seeking authority to proceed with a bidding and auction process to consummate a sale that the Debtor expects will generate maximum value for its assets. To facilitate the Sale, the Debtor, in consultation with its other professional advisors, has developed certain customary bidding procedures (i.e., the Bid Procedures) to preserve flexibility in the sale process, generate the greatest level of interest in the Debtor’s assets and result in the highest or otherwise best value for those assets. Among other things, these procedures, in the Debtor’s business judgment, create an appropriate timeline for the Sale Process and are consistent with certain DIP Financing milestones. In keeping with the Debtor’s and its professionals’ commitment to transparency, the Creditors’ Committee, the County, the DIP Lender and all other parties in interest will be informed as this process continues.”

About the Debtor

The Debtor is a subsidiary of Klausner Trading USA, Inc. (KTU) which was established in 2006 and operates as distribution company with headquarters located in Myrtle Beach, SC. The company is the sole distributor of products from Klausner US worldwide and Europe sold in North America.

Klausner Lumber One (KL1) and Klausner Lumber Two (KL2) are the two state-of-the-art Southern Yellow Pine (SYP) sawmills currently under construction in the USA. Klausner Lumber One (KL1) is located in Suwanee County, Florida near the town of Live Oak and Klausner Lumber Two (KL2) in North Carolina in an area located in Halifax County near the town of Enfield.

The Klausner Group was founded in 1991 when Austrian Fritz Klausner built his mill in former East Germany as a green field investment. The company and sales management office, Klausner Trading International, is headquartered in Oberndorf, Austria, in close vicinity to the Klausner family’s first sawmill founded in 1918 (closed in 1996).

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