Turnarounds & Workouts | August.05.2014
Restructuring counsel Doug Mintz was quoted in Turnarounds & Workouts about a recent ruling that a prospective DIP lender was entitled to a general unsecured claim for the amount of the break-up fee, but that the claim was not entitled to administrative expense priority.
In the article “Breaking Up is Hard to Do; Break-Up Fee Denied Administrative Priority,” Mr. Mintz noted that the decision in the chapter 11 case of C & K Market presents risks to both potential DIP lenders, as well as other parties negotiating break-up fees with a debtor-to-be. "If embraced outside the District of Oregon, Judge Alley's decision casts doubt on the ability to be paid in full as an administrative creditor with respect to a breakup fee that a debtor might agree to prepetition," he said. "Thus, if the opinion were to gain acceptance beyond this case, Judge Alley's opinion could chill prepetition offers to serve as new DIP lenders, or possibly even as stalking horse bidders in a section 363 sale."