The Office of the U.S. Trustee has raised concerns over the bid protections package proposed by electric-engine developer First Mode Holdings for its stalking horse bidder, Cummins Inc., urging a Delaware bankruptcy judge to reject the debtor’s request to treat expenses and fees related to the $15 million bid as priority claims.
In an objection filed on Thursday, the bankruptcy watchdog contended that portions of First Mode’s motion—specifically the request to pay up to $1 million in bid protections, including a breakup fee of $450,000 and expense reimbursements of up to $550,000—should be denied.
The U.S. Trustee argued that the bid protections would unfairly reward Cummins with the breakup fee even if the company’s offer did not contribute value to the estate. Such situations could arise, for example, if the bankruptcy case were dismissed or converted into a Chapter 7 liquidation. Additionally, the U.S. Trustee maintained that none of the bid protections could qualify for super-priority administrative expense status, which would require the claims to be paid before all other unsecured claims.
