Restoration Forest Products’ DIP loan draws committee objection

By Sarah Lizee

Olympia, Wash., Feb. 29 – Restoration Forest Products Group, LLC’s motion for final approval of a $95 million debtor-in-possession financing package from funds managed by Invesco Senior Secured Management, Inc. drew an objection from the official committee of unsecured creditors, according to documents filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

The committee said it does not dispute the need for DIP financing, but its terms “work in tandem” with the plan to limit the rights of unsecured creditors and restrict the committee’s ability to serve its function in the cases.

The committee said its immediate concern is the plan’s proposed “double death trap” for unsecured creditors.

The plan provides no value for unsecured creditors unless, after confirmation, they opt into releases of various parties. To the extent unsecured creditors do opt into the releases, they will share in a $400,000 cash pool.

The committee said the second prong of the death trap restricts the committee from objecting to confirmation or asserting a challenge.

“If the committee does either, or refuses to terminate the challenge deadline by the confirmation hearing, then unsecured creditor recoveries will be diluted by at least $56 million in deficiency claims,” the committee said in the objection.

“Unsecured creditors should not be punished because the committee exercises its statutory and fiduciary duties.

“The lenders’ and equity holders’ desire to insulate themselves from scrutiny is predictable, but this provision goes too far.”

The committee said the death trap, its implications, and the confirmation timeline are directly linked to the DIP facility.

While the DIP order provides for an April 13 challenge deadline, the committee must assert its challenge by the March 13 plan objection deadline.

“The plan provides broad estate releases of all conceivable causes of action against every relevant litigation target,” the committee said.

“It is undeniably futile to assert a post-confirmation challenge for causes of action that were released under a confirmed plan.”

The DIP order also requires the committee to obtain standing before the challenge deadline, which would not give it enough time to draft a standing motion setting forth its potential challenges, the committee added.

“The debtors, Invesco and Lateral should not be permitted to foreclose the committee’s right to conduct a meaningful investigation, particularly when the DIP and plan were dictated by the very parties that stand to benefit from a truncated timeline,” the committee said.

The Bellemont, Ariz.-based sustainable forest products company filed Chapter 11 bankruptcy on Jan. 29 under case number 24-10120.

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