KPS approved as FBI stalking horse bidder
Heath E. Combs -- Furniture Today, October 7, 2013
WILMINGTON, Del. - KPS Capital Management emerged last week as the stalking horse bidder in the bankruptcy case of Furniture Brands International, pushing aside an earlier bid by Oaktree Capital Management that was backed by FBI.
On Wednesday, U.S. Bankruptcy Judge Christopher Sontchi approved KPS as stalking horse bidder and as the replacement for debtor in- possession financing in FBI's bankruptcy, according to officials with Cohen Tau ber Spievack & Wagner P.C., who attended the hearing.
The news came as a surprise because FBI had wanted Oaktree as its stalking horse bidder and DIP financing provider. The KPS bid was also backed by a committee of unsecured creditors.
"KPS was persistent. And the fact that the unsecured creditors committee was strongly backing KPS and its deal had much to do with them winning the coveted stalking horse position," said Jerry Cohen, an attorney and partner at Cohen Tauber.
Oaktree will be reimbursed on its interim DIP financing and fees, Cohen Tauber officials said.
KPS emerged last week as the top stalking horse bidder for FBI with a $280 million offer that was $20 million higher than a revised offer from Oaktree.
Final details of the KPS offer and sale procedures were unclear at press time.
Other bidders will still be able to submit bids for FBI's assets by Dec. 5. A court-supervised auction, if necessary, will take place Dec. 10, and a hearing to confirm the sale is scheduled for Dec. 12.
FBI asked the court last week to approve Oaktree's revised stalking horse bid of $260 million, which included cutting the breakup fee from $6 million to $4 million. Its unsecured creditors, however, wanted the higher bid from KPS. It was unclear why FBI selected Oaktree.
Both bids included the company's Lane assets, which Furniture Brands originally had said would be sold separately from Thomasville, Broyhill, Drexel Heritage and other brands. Oaktree's bid left room for a Lane sale prior to Oaktree's obtaining FBI's assets.
In September, Oaktree's initial first-day bid for FBI totaled about $215 million. That day, KPS submitted another bid for FBI's assets of $225 million.
On Sept. 23, KPS upped its offer for all the company's assets - including Lane - to $250 million. That week, FBI and the unsecured creditors gave KPS and Oaktree until Sept. 26 to submit final offers.
FBI received the subsequent $260 million offer from Oaktree, including the reduced breakup fee.
KPS made another offer for a total price for all FBI assets of $270 million, and then another proposal for $280 million, plus a breakup fee of $4 million.
The unsecured creditors committee said that accepting the low Oaktree bid was an unsound decision and that the KPS asset purchase agreement offer represented "materially better terms than the Oaktree agreement." The committee also wanted more oversight of FBI's bankruptcy budget.
It also wanted more oversight in the sale process - since FBI has over $300 million in unsecured debt, while it said the company's secured creditors were over secured.
They also argued that bidding for just a portion of FBI's assets should be allowed, not just as combination bids of assets in FBI's proposed sale procedures.
"Each additional dollar increase from a sale of debtors' assets will increase the recovery to the estate, and thus, to unsecured creditors," their motion said.
The selection of KPS could be a good omen for Lane. KPS indicated in a proposal letter on Sept. 27 that it was only interested in the transaction if Lane continued operations.
"The actions of the debtor since the petition date have evidenced to Lane employees, customer and vendors the intention to liquidate Lane," the KPS proposal letter said.
Furniture Brands media officials said the company had no comment on the bidding process.