DVI's sale of assets to bank needs further court scrutiny, says U.S. Trustee

By Carlise Newman

Chicago, Nov. 24 - The acting U.S. trustee has objected to DVI Inc.'s motion to obtain court approval of its sale of certain assets of subsidiary SPG to Capital Crossing Bank, approve a break-up fee and authorize the company to enter into a servicing agreement with the bank, saying the break-up fee and sale need further court scrutiny

As proposed, the break-up fee could be paid before a sale closes, said Trustee Roberta DeAngelis in a filing with the U.S. Bankruptcy Court for the District of Delaware.

Normally a break-up fee is allowed to the stalking horse bidder after that bid has prompted the company to put assets up for sale, has helped attract bids or has in some other way preserved or enhanced the value of the estate.

DVI must also provide evidence that the sale is for fair value and that a good business reason exists, the trustee said.

Initially the court must determine that the bidding procedures brought the best price for the company's assets, the trustee said. DVI must show that the assets have been fully marketed, and that the sale is sufficiently publicized to prove that the assets will be sold for a fair price. The court must also find that the sale does not contain any manipulation. DVI's relationship to the purchaser must be fully disclosed, including any agreements.

DVI, a Jamison, Pa.-based medical finance company, filed for Chapter 11 protection on Aug. 25.

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