Hooper Holmes – DIP Provider SWK Objects to Bid Procedures Which “Strip” it of Credit Bidding Rights

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September 14, 2018 – SWK Funding LLC (“SWK”) filed with the Court an objection [Docket No. 85] to Hooper Holmes’ bid procedures motion [Docket No. 18]. SWK asserts, “SWK has been supportive of a beneficial sale of substantially all of the Debtors’ assets and has committed to provide additional, postpetition financing to allow the Debtors’ to consummate such an additional, beneficial asset sale. Indeed, SWK funded millions of dollars of additional advances during the last three months in order to facilitate a fulsome sale process. But, SWK’s provision of financing was intended to foster the consummation of a beneficial asset sale, not just any asset sale. Accordingly, the DIP financing term sheet governing SWK’s provision of postpetition financing to the Debtors contains customary covenants that require, among other things, that the Debtors provide SWK with advanced notice of the Debtors’ proposed motion to approve procedures for the sale of substantially all of the Debtor’s assets, and that such motion be in a form acceptable to SWK. Unfortunately, the Debtors failed to provide SWK with advanced notice of their proposed motion to approve procedures for the sale of substantially all of their assets and did not provide SWK with sufficient opportunity to review such motion or sale procedures. When SWK was able to review the Debtors’ proposed sale procedures (after the Bid Procedures Motion was filed with the Court), SWK discovered that the Debtors’ sale procedures contained terms that arbitrarily strip SWK of its statutory credit bidding rights by requiring all auction participants to confirm that their bid will be an ‘all-cash’ offer. Of course, such an attempt to arbitrarily strip SWK of its statutory credit bidding rights is impermissible as a matter of law.”

 

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