Hurry Up and Wait: The Weinstein Co. Chapter 11 Hearing #6

All Credit Slips readers are old enough to remember when a quick going-concern sale of The Weinstein Company was said to be imperative. So much so that even the seemingly skeptical creditors' committee ultimately went along, thus making the request to sell the company to Lantern Capital uncontested.

On June 22, at its 6th hearing, and about 6 weeks after the court's sale approval, TWC essentially acknowledged it cannot close the sale to its stalking horse bidder on the terms requested and approved by the court, and certainly not by the end of June as represented at hearing #5. TWC therefore will be seeking court approval for Lantern to acquire the company for less money than the agreement and court order specified. By the creditors' committee's calculation, TWC is seeking a 11% reduction in the cash price, but that estimate is one of several points of contention between it and TWC. Given the dates and deadlines in various financing orders and deals, TWC said the issue absolutely positively must be resolved in early July - while the presiding judge is out of the country. The parties did not embrace the presiding judge's suggestion of a popular federal court tool: mediation by a fellow sitting judge. So a key outcome of the June 22 hearing is that a different Delaware bankruptcy judge will preside over a July 11 hearing on changing the TWC/Lantern deal. That judge already has held a quickly-scheduled telephonic status conference today, June 25 (see dockets ##1106, 1107).

As an outside observer not privy to the negotiations, I have no idea whether this deal will close. Perhaps due to lack of imagination, I have never understood how a potential purchaser could be deemed the highest and best bid for a company without a basic understanding what contracts and licenses were included. Meanwhile, especially if it was true that some competing bidders could not meet the deadline due to inability to get information from TWC in a timely fashion, significantly changing the deal without resuming some competitive process seems troubling.

No one at the June 22 hearing disputed that general unsecured creditors would be directly affected by TWC's request to change the terms of the sale. But the judge implied some skepticism by asking whether, say, "very secured" creditors have reason to care. The answer depends, it seems to me, on how  "very secured" is determined, due to allocation issues among entities in the TWC corporate family. If there was ever a case to highlight why one should resist the assertion of a single waterfall, it is this one.