New Stream Secured Capital creditors committee objects to DIP financing; offers alternative

By Lisa Kerner

Charlotte, N.C., April 12 - New Stream Secured Capital, Inc.'s official committee of unsecured creditors objects to the company's request for an order approving its debtor-in-possession financing, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

The proposed financing "is tied to an overly aggressive" timeline for a sale of the debtors' primary assets - portfolios of life insurance policies - to MIO Partners, Inc. and funds controlled by MIO, without an auction process.

"The debtors persist in seeking final approval of the DIP financing's 'roll up' of more than $41 million of pre-petition debt owed to the MIO entities, while denying the committee a reasonable period of time to confirm the validity and priority of that debt," the filing said.

In its motion, the committee proposed that it have the right to pursue alternative DIP financing through May 29, the date MIO's DIP financing runs out.

The committee said it will ensure any proposed loan will contain sufficient funds to repay MIO for any amounts advanced post-petition, about $15 million, and pay into an escrow account, or the court, the pre-petition bridge loan of about $42 million.

DIP extended

As previously reported, New Stream was granted an extension of its $56.82 million of new DIP financing from MIO through April 14.

The company received interim access to $4 million of the financing in March.

As previously reported, the company's total DIP financing includes $15 million of new financing and a roll-up of $41.82 million of a pre-bankruptcy loan.

The financing will mature on the earlier of May 16 and confirmation of New Stream's pre-packaged plan.

Interest will be Libor plus 550 basis points with a 3.5% Libor floor.

Creditor Topwater Exclusive Fund III, LLC previously objected to the DIP facility, arguing that the loan in the DIP motion appears designed to "cede ownership" of primary assets and life insurance policy portfolios to MIO at "less than fair value," a prior court filing said.

New Stream, a Ridgefield, Conn.-based investment fund, filed for bankruptcy on March 13. The Chapter 11 case number is 11-10753.

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