Hussey Copper sells assets to Libertas Copper LLC for $107.75 million

By Jim Witters

Wilmington, Del., Nov. 16 - Hussey Copper Corp. received court approval on Wednesday for the sale of substantially all the company's assets for $107.75 million to Libertas Copper LLC, an affiliate of Patriarch Partners, LLC.

The sale price is $19 million above the $88.7 million stalking horse bid submitted by Katman Metals LLC.

Debtors attorney Mark Minuti said the Libertas bid includes $77.5 million in cash and the assumption of the Hussey Copper employees' defined benefit plan.

Sharon L. Levine, representing the official committee of unsecured creditors, said the sale represents a recovery of 60 cents to 75 cents on the dollar for unsecured creditors.

Closing on the deal will occur as soon as possible and by Dec. 11 "at the outside," Minuti said. Hussey's debtor-in-possession credit facility ends on Nov. 28.

Global Brass and Copper, Inc. was named backup bidder at $107.5 million. Global is an affiliate of KPS Capital Parters, LP.

Judge Brendan L. Shannon approved the sale to Libertas over the objections of bidders Nehoshet Enterprises, Inc. and Revere Copper Products, Inc., who claimed the auction was improperly conducted.

Bidder objections

Attorneys for Revere and Nehoshet argued that the auction results were incomplete because their clients were excluded from bidding until the highest and best bid was achieved.

During the Nov. 14 auction, which stretched across 11 hours and 34 rounds of bidding, the debtors, in consultation with the official committee of unsecured creditors, PNC Bank NA, the company's chief restructuring officer and investment banker SSG Capital Advisors, LLC determined that bidding by Revere and Nehoshet should be prohibited.

In the case of Revere, one Global representatives objected after learning that Revere had received a second letter from the U.S. Department of Justice raising concerns about Revere's ability to buy Hussey under the Hart-Scott-Rodino Antitrust Improvements Act. Revere is a competitor of Hussey.

Minuti said the debtors determined that Revere had no chance of closing a sale within the time frame the debtors required, so they excluded them from further bidding, unless Revere agreed to post a forfeitable $5 million deposit and include in its bid a "hell-or-high-water" promise it would close on time.

Revere attorney Joseph Barry argued that the debtors were aware of the potential Hart-Scott-Rodino issues before the auction and decided to change the rules during the auction only to appease Libertas and Global.

"We did what we thought was prudent. We gave them a road map to stay in the auction. They declined," Minuti said.

During a break in the auction, Nehoshet decided to withdraw, said Nehoshet attorney Stanley E. Levine. After that decision, Nehoshet and Revere discussed "possible synergies," he said.

An SSG representative called Nehoshet and asked them to rejoin the auction, which they attempted to do, Levine said.

At that point, Global representatives objected, saying Nehoshet and Revere had met during the break and colluded in violation of the sale procedures and the confidentiality agreements in place.

Levine said he assured everyone present that Nehoshet and Revere had no agreement. But the debtors dismissed Nehoshet from the bidding.

J. Scott Victor of SSG said the debtors feared that Libertas and Global would walk away from the auction if Nehoshet was allowed to continue bidding.

Minuti said his reasoning was that Libertas and Global represented "money good," and he did not want to risk the offers on the table - at that time around $106 million.

Shannon's conclusions

Judge Shannon said he was satisfied that the debtors acted in the best interests of the estate and achieved the highest and best bid available under the circumstances.

The debtors' concern about Revere's ability to close on time was legitimate, he said. And the debtors' offer to allow Revere to continue bidding with additional considerations was reasonable. The change in the rules was "significant," but fair and fully disclosed, he said.

The risk that the other bidders would walk away if Revere and Nehoshet were allowed to continue bidding was "a judgment call," Shannon said.

Regarding Nehoshet, Shannon said the decision was "reasonable and intended to preserve value already on the table."

He said he would not substitute his opinion for the business judgment of parties with money at stake.

Shannon found "no suggestion of wrongful conduct" or collusion by Revere or Nehoshet. He said they were motivated bidders being creative, and Nehoshet's disclosure of the discussions was sufficient.

Hussey is a Leetsdale, Pa.-based copper products manufacturer. Its Chapter 11 case number is 11-13010.

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