“Permitting bid protections to prime other administrative expenses has no basis in the Bankruptcy Code and is inconsistent with Third Circuit precedent,” the trustee wrote in its objection.
First Mode Holdings, based in Seattle, filed for bankruptcy in December with nearly $98 million in debt after its parent company, mining giant Anglo American, ceased funding the startup and accelerated approximately $70 million of debt. First Mode specializes in developing hybrid and all-electric engines for vehicles used in industrial operations.
Anglo American has agreed to fund First Mode’s bankruptcy proceedings, including providing debtor-in-possession financing and subordinating its claims, while the company has been selling off significant assets as part of a Chapter 11 auction.
As part of its bankruptcy process, First Mode has sought court approval for an end-of-January bankruptcy auction, with Cummins’ $15 million stalking-horse bid setting the price floor. The debtor also requested approval for a package of bid protections for Cummins, including a 3% breakup fee, which amounts to about $450,000, as well as up to $550,000 in expense reimbursements. Moreover, First Mode asked for these bid protections to be classified as super-priority administrative expense claims.
