Trustee opposes RathGibson breakup fees

RathGibson Inc., a manufacturer of welded tubing products, is proposing breakup fees and expenses that are too high, the U.S. Trustee in Delaware said in a court filing.

RathGibson intends to hold a May 19 auction to test whether there is a better offer to underlay a Chapter 11 plan. The opening bid of $93 million cash will come from a group including some of the existing secured lenders and holders of 70 percent of the $209.5 million in 11.25 percent unsecured notes.

The U.S. Trustee says that the proposed breakup fee and expense reimbursement, $5.54 million, equals 5.9 percent of the sale price, or more than Delaware bankruptcy courts ordinarily allow.

The sale is part of RathGibson's plan incorporating a settlement with creditor groups. For details about the plan, click here to see the March 11 Bloomberg daily bankruptcy report.

The original plan was negotiated with holders of 73 percent of the senior unsecured notes before the Chapter 11 filing in July. The Lincolnshire-based company listed assets of $305 million against debt totaling $319 million. In addition to $209 million in senior notes, debt includes $55.3 million on secured credit agreements and $10.4 million owing to trade suppliers. The holding company is also liable on $115 million in pay-in-kind notes. A group including management and an affiliate of DLJ Merchant Banking Partners acquired control of RathGibson in June 2007.

The case is In re RathGibson Inc., 09-12452, U.S. Bankruptcy Court, District of Delaware (Wilmington).