Under the Bankruptcy Code, super-priority administrative expense claims must be paid before other unsecured claims in a case, such as those owed to attorneys and other professionals. In its objection, the U.S. Trustee emphasized that the bid protections package does not meet the necessary criteria for super-priority status.
The U.S. Trustee’s objection also detailed the conditions under which the breakup fee would become due. The fee would be triggered if First Mode or its affiliates withdrew the sale motion, filed a motion to dismiss or convert the bankruptcy case to Chapter 7, or requested the appointment of a Chapter 11 trustee or examiner. In these instances, the U.S. Trustee argued, Cummins’ stalking-horse offer would not have added any value to the estate and therefore the bid protections should be denied.
“Because the stalking-horse APA awards bid protections to the stalking-horse bidder that will have contributed no value to a sale, approval of bid protections in such circumstances must be denied,” the trustee said in the objection.
