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November 19, 2020 – Further to a November 18th hearing, the Court hearing the Klausner Lumber Two case issued an order approving (i) proposed bidding procedures for the sale of substantially all of the Debtor's assets, (ii) the entry by the Debtor into a stalking horse agreement with Mayr-Melnhof Holz Holding AG (the “Stalking Horse Purchaser”), further to which the Stalking Horse Purchaser has agreed to pace a section 363 auction/sale process with an up to $30.0mn bid and (iii) an auction/sale timetable culminating in a December 10th auction and a December 17th sale hearing [Docket No. 421].
The Stalking Horse APA is attached to the Debtor's bidding procedures motion as Exhibit C [Docket No. 381.4].
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."
Key Terms of Stalking Horse Agreement:
- Seller: Klausner Lumber Two LLC
- Buyer: Mayr-Melnhof Holz Holding AG
- Purchase Price: The purchase price for the Purchased Assets shall be: (i) $30.0mn in cash (the “Base Amount”), plus (ii) the assumption of the Assumed Liabilities, including without limitation, the County Deferred Obligation (collectively, the “Purchase Price”).
- Bid Protections: (i) a Break-Up Fee of two percent (2%) of the Stalking Horse Purchase Price ($600k), (ii) an Expense Reimbursement not to exceed one percent (1%) of the Stalking Horse Purchase Price for any Sale (maximum $300k) and a $500k Initial Overbid Amount.
- Bid Deadline: December 4, 2020
- Auction: December 10, 2020
- Sale Objection Deadline: December 14, 2020
- Sale Hearing: December 17, 2020
- Sale Closing: January 8, 2021
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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