Quantum Foods amendment to DIP loan approved after buyer backs out

By Kali Hays

New York, May 22 - Quantum Foods, LLC received court approval on a third amendment of its debtor-in-possession financing in order to maximize value for its physical plants and equipment and wind down its business, according to a May 22 order with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the company said it defaulted on the DIP facility after stalking horse bidder Raging Bull Acquisition Co., LLC decided not to buy substantially all of its assets. The default arose because the company failed to obtain a sale order by April 21 or close the sale by April 23.

As a result, the company said it ceased the majority of its operations and reduced its active workforce to 67 employees focused on selling and shipping inventory to customers, collecting receivables, preserving and protecting equipment and assets and maintaining leased facilities.

After evaluating its options and discussing possible outcomes with representatives of the DIP agent, Quantum's official committee of unsecured creditors, the debtors union and other parties in interest, the company decided that a wind-down of business and a short-term effort to find a turnkey buyer for its three facilities could be a more favorable outcome than immediate conversion to Chapter 7 bankruptcy, according to the motion.

The amendment provides protection for all expenses going forward by including them in a carve-out.

In addition, the company said the amendment "provides for an almost certain increase in recoveries to administrative claimants (and possibly priority claimants) through an increase in assets available to these constituents." It also provides for a priority in bankruptcy recoveries to administrative claimants and priority claimants by providing the first $1 million in net bankruptcy recoveries to those parties, as well as 50% of all bankruptcy recoveries in excess of $1 million, according to the motion.

Quantum foods, an Illinois-based provider of cooked beef, poultry and pork for school, military and retail outlets, filed for bankruptcy Feb. 18 under the Chapter 11 case number 14-10318.

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