Red River Waste’s second DIP loan motion draws objection from MUFG

By Sarah Lizee

Olympia, Wash., Nov. 19 – Red River Waste Solutions, LP’s second debtor-in-possession financing motion drew an objection Friday from pre-petition lender MUFG Union Bank, NA, according to a filing with the U.S. Bankruptcy Court for the Northern District of Texas.

As previously reported, the company has already received access to a $500,000 senior secured debtor-in-possession term loan facility from Weldon Smith. Now, the company is seeking access to a $2.8 million DIP term loan facility from SummitBridge National Investments VIII LLC.

MUFG said it objects to, among other things, that the second DIP motion seeks to refinance the first DIP loan with the second DIP loan, which has a higher interest rate. The first DIP loan bears interest at 6%, while the second, if approved, would bear interest at 13.5%.

“It does not make economic sense for debtor to refinance the first DIP loan at more than double the interest rate,” MUFG said, which added that the first loan doesn’t mature for nearly five months.

The lender also said that the company has not provided any meaningful information regarding the direction of the bankruptcy case.

MUFG said the company’s “consumption of cash, and the incurrence of post-petition debt, are rapidly diminishing the value of debtor’s assets, particularly debtors’ unencumbered assets, to the significant detriment of unsecured creditors, including MUFG.”

“Against this backdrop of administrative insolvency and shrinking asset value, both of which require speed in this case, debtor has provided no meaningful information to the court or creditors about a sale or plan of reorganization,” the lender said.

MUFG said that without specific information from the debtor about how and when its efforts now will differ from its pre-petition efforts, it’s impossible for the court or creditors to evaluate whether the funds represented by the second DIP loan will be enough to allow the debtor to operate, and to manage and conclude the bankruptcy case, or whether instead those funds will be consumed without benefit to the debtor’s estate.

The Dripping Springs, Tex.-based waste management company filed bankruptcy on Oct. 14 under Chapter 11 case number 21-42423.

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