Renovate America committee objects to some terms of sale to lender

By Sarah Lizee

Olympia, Wash., Feb. 26 – Renovate America, Inc.’s official committee of unsecured creditors objected to the company’s motion to sell its Benji assets to stalking horse bidder and debtor-in-possession lender Finance of America Mortgage LLC, according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

While the committee said it supports the sale in general, it objects to the transfer of valuable litigation claims to the lender for little or no consideration and to the extent it foists certain cure obligations upon the debtors.

The committee said it had negotiated a settlement with the lender regarding the conversion of the sale to a private sale, contingent on Finance of America Mortgage increasing its purchase price and committing to close the sale no later than Feb. 22.

The committee estimated that the private sale would have yielded at least $1.5 million incremental value to the estates.

“The debtors, however, refused to even to consider the private sale unless the committee agreed to certain unacceptable conditions, such as releases of all of the debtors’ directors and officers.”

The committee said it questions whether there are claims against the directors and officers related to the allegations made in the class action lawsuits against the debtors as well as the two failed marketing processes from earlier in 2020.

Renovate America later asserted that there was a “very interested, well capitalized” potential bidder, but did not disclose that one of the directors and officers was also a director of the potential bidder, the committee said.

At a hearing held Jan. 27, the committee told the court that the company’s attempt to use the private sale to leverage releases was “gravely concerning.”

However, the potential bidder had withdrawn from the auction process and no party other than Finance of America Mortgage submitted any bid for the assets.

“As a result of the debtors’ foolish gamble, the estates have incurred significant additional administrative costs and are left with a sale that results in a lower purchase price than what was available in a private sale,” the committee said.

The group said it believes that the sale to Finance of America Mortgage should go forward, as it is the only viable option to salvage value and save jobs.

However, among the assets to be sold in the proposed asset purchase agreement are all causes of action against any director or officer who is an identified employee in the agreement.

“At the outset, the committee had concerns about such releasing directors and officers just based on the allegations at the heart of the pre-petition litigation and not having had a chance investigate the two failed sales efforts,” the group said.

“The debtors post-petition conduct, which included misconduct with respect to the sale process, the improper attempt to hold the private sale hostage for the directors and officers personal gain, and the failure to disclose one of the directors’ and officers’ ties to a potential bidder, has only exacerbated these concerns.”

A hearing on the sale is scheduled for March 2.

Renovate America is a San Diego-based provider of financing solutions for environmentally friendly home improvement projects. The company filed bankruptcy on Dec. 21 under Chapter 11 case number 20-13172.

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