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Point Blank Solutions amends bidding procedures

by Jamie Mason  |  Published September 30, 2011 at 10:00 AM
Point Blank Solutions Inc. is hoping to amend its bidding procedures after its stalking-horse bidder, an affiliate of private equity firm Gores Group LLC, reduced its purchase price.

Judge Peter Walsh of the U.S. Bankruptcy Court for the District of Delaware in Wilmington will consider approval of the amended bidding procedures for the bankrupt tactical vestmaker on Oct. 5.

The bidding procedures were amended on Sept. 27 after stalking-horse bidder Barrier Acquisition LLC lowered its bid from $30 million in cash to $20 million, subject to adjustments.

The stalking-horse bidder reduced the purchase price after completing its due diligence, court papers said.

The Pompano Beach, Fla., company will sell its operating assets to Gores affiliate, Barrier Acquisition, through the sale.

Under the proposed amended bidding procedures, rival offers would have to start at $21 million -- the stalking-horse bid plus a breakup fee, expense reimbursement and a $250,000 overbid.

Bidders would also have to provide a $1.5 million deposit.

Bids would be due one day before the auction, which has not yet been scheduled.

If Point Blank received at least one other bid, it would hold an auction, at which bids would have to increase in increments of at least $100,000.

If Barrier Acquisition lost at auction, it would now receive a $500,000 breakup fee and up to $250,000 expense reimbursement, which was reduced from $750,000 breakup fee and $350,000 in expense reimbursement.

The debtor will allow credit bids at the auction, as long as they are accompanied by at least $750,000 in cash.

Point Blank wants to schedule the sale hearing for Oct. 28.

The providers of Point Blank's $25 million replacement debtor-in-possession loan, LoneStar Capital Management LLC, Privet Management LLC and Prescott Group Capital Management LLC, support the sale.

Point Blank filed for Chapter 11 on April 14, 2010, because of certain events during 2008 and 2009, such as significant delays in the awarding of U.S. military and federal government soft-body armor contracts, the poor economic climate and near-frozen credit markets.

Although it explored a sale in the early stages of its case, Point Blank avoided being auctioned in late 2010 by replacing its original, $20 million DIP from Steel Partners II LP with the loan from LoneStar, Privet and Prescott.

The debtor then sought approval of a reorganization plan that would have given its new equity to the DIP lenders in exchange for an additional investment. A reconstituted official equity committee, however, opposed the plan and the replacement DIP, arguing Privet and Prescott -- part of Point Blank's original equity committee -- exerted "onerous leverage" over Point Blank and had positioned themselves to "extract tens of millions of dollars in potential litigation recoveries as a 'bonus,' above and beyond repayment of their [DIP]."

The equity committee ceased supporting the debtor's plan when three new members, Jon Jacks, Jack Thurmon and Palogic Value Fund LP, joined the committee on March 28.

"Ultimately after extensive negotiations the parties were unable to agree on the terms of an amended plan of reorganization," the debtor said in court papers.

The debtor's most recent plan would have handed all new Point Blank shares and a share of potential litigation recoveries to the DIP lenders for $15 million to $25 million. Unsecured creditors and equity holders were promised pieces of a trust funded with at least $1 million and potential litigation proceeds.

Point Blank manufactures and provides bullet-, stab- and fragmentation-resistant apparel used by law enforcement, military, security and corrections personnel and government agencies. Point Blank's Interceptor Outer Tactical Vest, for example, was widely used among U.S. combat forces in Afghanistan during Operation Enduring Freedom and in Operation Iraqi Freedom in Iraq.

Point Blank derived $61.88 million in sales -- about 39.1% of its total $158 million in revenue -- from the federal government and U.S. military in 2009.

Laura Davis Jones, David Bertenthal, Joshua Fried, Timothy Cairns and Curtis Hehn of Pachulski Stang Ziehl & Jones LLP are debtor counsel.

Jennifer Cappelletty of Klee, Tuchin, Bogdanoff & Stern LLP represents Gores Group.

Robert Hirsh and George Angelich of Arent Fox LLP and Brian Arban and Frederick Rosner of Messana Rosner & Stern LLP represent the official committee of unsecured creditors.

Carmen Lonstein and Lawrence Vonckx of Baker & McKenzie LLP and Ian Connor Bifferato and Thomas Driscoll III of Bifferato LLC are counsel for the equity committee.
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Tags: auction | bankruptcy | Gores Group LLC | Point Blank Solutions Inc. | private equity

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