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Bankruptcy Partner, Aaron Hammer Speaks with TheDeal.com on Trinsic Inc.

Trinsic dumps "onerous" DIP

Trinsic Inc. has gotten the green light to abandon its debtor-in-possession loan in favor of a different form of financing.

According to Aaron Hammer of Freeborn & Peters LLP, counsel to the Tampa, Fla.-based competitive local exchange carrier's unsecured creditors committee, Trinsic has been cleared to tap into cash collateral to finance its operations.

Judge Margaret A. Mahoney of the U.S. Bankruptcy Court for the Southern District of Alabama in Mobile approved use of the cash collateral on Wednesday, Feb. 28.

She also approved Trinsic's bidding procedures, which outlined the sale of the company's assets, Hammer said.

Meanwhile, the approved cash collateral order allows Trinsic to escape from what its creditors committee called an "onerous" DIP loan from senior lender Thermo Credit LLC.

The company was already cleared to access an interim portion of the $11 million DIP before the committee was formed and could object to the loan.

The debtor and the committee then jointly resolved to file an emergency cash collateral motion and forego final approval of the DIP.

The two also said in court papers that the company was cash-flow positive and could afford to finance itself until it completed an asset sale.

That question remains: Why did the debtor even need the Thermo DIP?

"We're trying to get to the bottom of why the DIP was put in place to begin with," Hammer said, adding that the committee will conduct a "full investigation" on the matter.

The loan, meanwhile, also only provided $1.67 million in new money.

About $5.92 million was already drawn down on the DIP as of Feb. 27, filings show. Thermo has already had its prepetition secured claim paid off through the DIP.

Under the bidding procedures order, meanwhile, a March 9 auction has been set and a hearing to approve the sale has been scheduled for March 14.

Bids are due on March 7. Qualifying bidders are required to submit a minimum $2.1 million deposit that satisfies a settlement between Trinsic and a group of utilities.

No bid will be deemed qualified unless it has an enterprise value of at least $22 million, meaning that the value of the offer in addition to assets that are excluded from the transaction other than causes of action hit that figure, filings show.

Bidding will rise in $50,000 increments.

Trinsic, which provides local and long-distance telephone services to residents and businesses, filed for Chapter 11 protection on Feb. 7 in Mobile.

Christopher Strickland, Kelly Aran and Vicki Travis are debtor counsel at Levine, Block & Strickland LLP.


 

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