Introduction
On June 24, 2019 (the “Petition Date”), HDR Holding, Inc. and Schramm, Inc. (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware
The Debtors are represented by Young Conaway Stargatt & Taylor, LLP. The case has been assigned to the Honorable Mary F. Walrath. A hearing on the Debtors’ first day motions was held on June 25, 2019. A meeting to appoint an official committee of unsecured creditors is scheduled for July 2, 2019.
The Debtors filed bankruptcy to maximize the value of their assets for the benefit of their stakeholders through the sale of their businesses. The Debtors have a proposal from their prepetition lender GenNx360 to provide $6 million in DIP financing and to serve as the stalking horse bidder for substantially all of the Debtors’ assets.
Background
Headquartered in West Chester, Pennsylvania, the Debtors are a leading global manufacturer and supplier of branded land-based hydraulic drills and equipment to the mining, oil and gas, water and other end-markets.
Unfortunately, the Debtors have been unable to satisfy their obligations under their secured credit facilities and are facing near-term liquidity issues. The Debtors and their professional advisors have determined that the best course to maximize the value of the Debtors’ estates was to initiate the chapter 11 bankruptcy for purposes of effectuating a sale of the Company as a going concern, while preserving the value of their assets, maintaining their business operations for the benefit of vendors and service providers, and ensuring that employees will be able to keep their jobs.
Financial Condition
As of the Petition Date, the Debtors had not less than approximately $20 million in outstanding secured debt obligations.
Motion for DIP Financing and/or Cash Collateral Motion
The Debtors are seeking authority to obtain up to $6,000,000 in principal amount of post-petition financing and to access up to $3,000,000 in the interim. In addition, the Debtors are seeking authorization to continue to use cash collateral and all other prepetition collateral. The DIP facility and use of cash collateral will enable the Debtors to operate their business in the ordinary course to preserve the going-concern value of the Debtors’ assets and complete the proposed sale.
Other Significant First Day Motions
Bidding Procedures Motion
The Debtors are seeking an expedited sale process. The Debtors entered into a stalking horse purchase agreement with Schramm II, Inc., an acquisition vehicle created by GenNx360 Capital Partners, L.P. (the “Stalking Horse Bid”). The Stalking Horse Bid is for not less than $10,300,000 plus the balance owing under the Debtors’ post-petition secured financing facility estimated to be $6,000,000 consisting of a credit bid and the assumption of certain liabilities as set forth in the stalking horse purchase agreement. The key dates pursuant to the terms of the bidding procedures are:
| Event | Date |
| Deadline for entry of the bidding procedures under the DIP facility | On or before July 19, 2019 |
| Sale objection deadline | August 7, 2019 |
| Bid deadline | August 13, 2019, at 5:00 p.m. (ET) |
| Auction (if necessary) | August 15, 2019 at 10:00 a.m. (ET) |
| Deadline to object to conduct of the auction and sale to the successful bidder | August 16, 2019, at 4:00 p.m. (ET) |
| Sale Hearing | August 19, 2019 |
| Outside date for closing to occur | September 3, 2019 |
Insurance Programs Motion
The Debtors seek authorization to continue and, to the extent necessary, renew liability, property and other insurance policies and pay premiums, including prepetition obligations arising in the ordinary course of business and to continue their insurance premium financing programs. The Debtors pay approximately $600,000 in annual premiums for their insurance policies and finance approximately $51,000 of those premiums. The Debtors are seeking authorization to pay and honour their prepetition insurance obligations in an aggregate amount not to exceed $350,000, excluding payments related to their workers’ compensation program on an interim basis.
Taxes and Fees Motion
The Debtors are seeking authority to pay certain prepetition taxes and fees that, in the ordinary course of business, accrued or arose before the Petition Date in an aggregate amount not to exceed $40,000 without further order of the court and that in the twenty one days from entry of the order, no amounts in excess of $10,000 in the aggregate.
Wages and Benefits Motion
The Debtors seek authority to pay certain prepetition compensation and reimbursable expenses, honour workforce obligations, and maintain and continue employee benefits programs. The Debtors are seeking authority to pay the unpaid prepetition compensation up to the statutory cap of $13,650. In addition, the Debtors are seeking authorization to pay prepetition business expenses and amounts incurred under the Debtors’ corporate credit cards that were accrued and unpaid as of the Petition Date. As of the Petition Date, the Debtors had fifty-four employees.
Critical Vendors Motion
The Debtors are seeking authority to pay, in the ordinary course of business, certain prepetition claims of certain vendors, suppliers and service providers who are essential to the Debtors’ ongoing business operations. The Debtors seek authorization to pay prepetition critical vendors claims in an amount not to exceed $1,269,000 pursuant to an interim order and $1,692,000 pursuant to a final order. The Debtors list critical vendors as administrative service providers that are necessary to maintain the Debtors’ supply chain and day-to-day operations.
Customer Programs Motion
The Debtors are seeking authority to honour and continue their customer programs and meet their customer obligations in the ordinary course of business. Prior to the Petition Date, the Debtors offered and engaged in certain customer-related programs and practices. The customer programs, included, but are not limited to, a warranty program and a customer deposit program. The Debtors incurred expenses of approximately $12,000 per month related to the warranty program. Through the customer deposit program, the Debtors allow customers to deposit cash to be used as pre-payments for current or future parts orders. As of the Petition Date, the Debtors held approximately $783,000 in deposit from the customer on account of rig orders and approximately $530,000 in deposits from customers on account of parts orders.
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