Unsecured Creditors Oppose Burlington Auction Proc

Greensboro, NC, Feb. 24--Burlington Industries' committee of unsecured creditors has told a bankruptcy court that it opposes the company's proposed auction procedures, including a $14 million breakup fee for lead bidder Berkshire Hathaway. The committee, according to court papers, said the procedures would “chill” bidding for the new equity of Burlington, which is under Chapter 11 bankruptcy protection. The committee, led by WL Ross & Co., said the company is rushing the auction and bid procedures hearing to result in a bargain for Berkshire at the expense of unsecured creditors. Under the reorganization plan proposed by Burlington, Berkshire would acquire all of Burlington’s new equity for $579 million in cash to pay off creditors. If the court fails to approve the bid procedures by March 2, Berkshire can cancel the deal. The deal would also be subject to higher offers at an auction, which Burlington hopes to hold April 21. Under the proposed auction procedures, parties would have until April 14 to submit competing bids, which would have to top the Berkshire offer by at least $19 million. Those procedures, however would not apply to WL Ross, which has said it wants to file a stand alone reorganization plan for the company. A hearing on the bid procedures is set for February 27. The unsecured creditors committee also has objected to the company's request to extend its exclusive period for filing a reorganization plan and soliciting support. The committee urged the court to shorten the plan solicitation period to the 27th from its current expiration of March 31. The committee, according to court papers, said it would be ready to sponsor a competing plan that would have creditor support. The committee and the holders of more than 51% of the value of all unsecured claims are opposed to the proposed sale to Berkshire, according to the committee's filing. The committee said that as a result, Burlington's plan will inevitably be defeated at confirmation, and there is no reason to extend the exclusive plan voting period. Burlington's unsecured creditors committee has separately asked the court to allow the company to pay due diligence fees to potential exit lenders for the stand alone plan that the committee wants to formulate.

Related Topics:Shaw Industries Group, Inc.

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