Red River Waste’s second DIP motion draws objection from committee

By Sarah Lizee

Olympia, Wash., Nov. 22 – Red River Waste Solutions, LP’s second debtor-in-possession financing motion drew an objection on Monday from the official committee of unsecured creditors, 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.

The committee said that the court should not approve the second DIP motion in its current form until the debtor offers a potential successful bankruptcy exit for the case.

“It is readily apparent that the proposed financing in this case is needed but without a concrete path in this case, the proposed financing could provide a ‘bridge to nowhere,’” the committee said in its objection.

“If the debtor contemplates one or more transactions that will benefit unsecured creditors, the debtor should come forward seeking approval of the path towards consummation of such a transaction prior to the time of final approval of the second DIP motion.”

The committee also noted that under the proposed financing, the lender captures liens on unencumbered property valued in excess of the financing, property that may otherwise provide a source of recovery for unsecured creditors.

As previously reported, pre-petition lender MUFG Union Bank, NA has also objected to the second DIP motion.

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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