Creditors, suitors object to terms of AWI bid

A bankruptcy financing package for Associated Wholesalers Inc. offered by suitor C&S Wholesale Grocers would benefit only bank lenders and C&S, leaving little for product suppliers, creditors in AWI’s bankruptcy case charged.

A hearing on the debtor-in-possession financing package is set for later this week in Wilmington, Del., where AWI filed for protection under Chapter 11 of the U.S. Bankruptcy Court earlier this month.

As reported previously, C&S has offered to buy AWI out of bankruptcy court, and offered to participate in financing that would allow AWI to continue operating until sold at auction. However, an ad-hoc creditor committee whose members include Coca-Cola, Johnsonville Sausage, Kellogg’s and six other suppliers in a filing said that agreement as written fails to make allowances to pay so-called Section 503(b)(9) claims for debts incurred in the 20 days prior to the Chapter 11 filing. The creditors in the ad-hoc committee say they are owed nearly $3.5 million in such claims.

“The proposed DIP Facility, if not modified substantially … will provide a windfall to the bank lenders and C&S, all while leaving the debtors’ estates administratively insolvent,” the filing said.

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Aspects of the plan have drawn separate objections from other parties including Supervalu, which identified itself as one of the companies that expressed an interest in acquiring AWI. The Minneapolis wholesaler in a filing argued for modifications to the procedures governing bids at the forthcoming auction including what it called an “excessive” $5 million breakup fee for C&S, the auction’s “stalking horse.”