Greek owners think they are slick:
New York (September 10, 2013, 7:09 PM ET) -- Excel Maritime Carriers Ltd. on Monday urged a New York bankruptcy judge to reject its creditors’ bid to access $20 million sitting in an escrow account, saying that money belongs to the entity that is slated to take over the shipping company when it exits bankruptcy.
In a cross-motion for summary judgment in the official committee of unsecured creditors’ adversary proceeding, Excel contends the funds were placed into the account as part of a March 2012 agreement with senior lenders that would allow Excel to defer repayment of a $100 million secured credit facility for up to a year in exchange for raising at least $30 million in equity by Dec. 31, 2012, and obtaining a $20 million backstop commitment from Ivory Shipping Inc., which is also controlled by Excel’s chairman.
But the creditors, who recently filed their motion for summary judgment, contend the $20 million is unencumbered and should be used as recovery for general unsecured creditors.
Excel said the funds are not encumbered and that, under the 2012 agreement, they belong to Ivory. The sole purpose of the $20 million was for Ivory to buy Excel’s equity if its public offering didn’t raise enough, and in the event that the funds were not released by Dec. 31, 2012, they would be returned to Ivory.
The dry bulk shipper contends that the creditors have completely ignored that provision of the agreement and instead focused on a “ministerial catch-all” provision in the escrow agreement that allows the escrow agent, Seward & Kissel LLP, to make distributions from the fund at the company’s discretion.
“A plain reading of all relevant terms of the governing agreements, not just the ones cherry-picked by the committee, mandates that the complaint be dismissed and Excel’s cross-motion for summary judgment be granted,” Excel said in a court filing.
Its motion will be heard by U.S. Bankruptcy Judge Robert D. Drain on Sept. 30.
Excel entered bankruptcy in July with a prepackaged plan that would allow it to restructure with the help of a capital infusion of up to $50 million and the release of another $30 million in restricted cash. Lenders will get a restructured $771 million credit facility and all the stock in the reorganized company, according to court documents.
Its chairman, Gabriel Panayotides, is the majority shareholder in the company, and through a side agreement, 60 percent of the reorganized company’s stock will be transferred to Ivory, allowing the chairman to retain control of the company.
The side agreement quickly drew the ire of unsecured noteholders, who are owed $150 million but slated to receive only a 3 percent recovery under the plan. In an objection to Excel Maritime’s cash collateral motion, the noteholders called the plan “inappropriate and unconfirmable.”
The company — which estimates its total enterprise value at $600 million — owns and operates a fleet of 38 vessels that transport dry bulk cargoes like iron ore, coal grains, bauxite, fertilizers and steel.
Excel Maritime is represented in the adversary proceeding by George A. Zimmerman, Jonathan L. Frank, Steven J. Kolleeny and Julie E. Cohen of Skadden Arps Slate Meagher & Flom LLP.
The creditors are represented by Michael S. Stamer, Sean E. O’Donnell, Sunish Gulati, Roxanne Tizravesh and Sarah Link Schultz of Akin Gump Strauss Hauer & Feld LLP.
The case is In re: Excel Maritime Carriers Ltd., case No. 7:13-bk-23060, in the U.S. Bankruptcy Court for the Southern District of New York.
--Editing by Chris Yates.
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