Dippin' Dots Inc. can continue thawing out the cash collateral of lender Regions Bank, but use of the funds will come with a price.

According to court papers, Dippin' Dots, a maker of beaded ice cream, has agreed to sell its assets unless it can formulate a consensual reorganization plan with Regions.

Judge Thomas H. Fulton of the U.S. Bankruptcy Court for the Western District of Kentucky in Paducah on Friday, Nov. 18, signed a second interim cash collateral order that outlines the sale process as well as a new $201,842.34 debtor-in-possession loan. A final hearing is set for Jan. 19, court documents show.

Fulton previously approved interim use of cash collateral on Nov. 9. In exchange, Regions received blanket liens and mortgages on all of Dippin's assets.

Regions, owed about $10.78 million as of the Nov. 3 petition date, on Monday had objected to Dippin's use of its cash collateral, ahead of a Thursday hearing.

Regions Bank, which asserted it has a perfected lien on all of Dippin's assets, including cash, said the debtor could not provide it with adequate protection for use of the funds, court papers show. The bank asserted Dippin' has no equity in its assets.

The bank said it "would be agreeable to the concept of consensual cash collateral use if the debtor would commit itself to a timeline under which the assets of the debtor would be sold as a going-concern to a purchaser under Section 363 of the Bankruptcy Code." It continued, "A sale with competitive bidding would both ensure that the value of the debtor's business is realized and protect the jobs of the debtor's employees."

Fulton's order lays out such a timeline, which the Paducah, Ky., debtor must follow to retain use of its cash and the DIP.

Dippin' must hire a broker to assist with the sale process by Jan. 6 and file a bidding procedures motion by March 6. Regions would have to approve the procedures.

Fulton would have to sanction the motion by March 20, an auction would follow by May 10, and Dippin' would need to win sale approval by May 30. It would have until June 1 to close the deal.

The milestones could only be extended with the consent of Regions, according to court documents.

In the meantime, Dippin' can use the DIP and cash collateral pursuant to a budget that outlines expenses through Jan. 27. Budgeted amounts cover expenses such as nitrogen and dry ice, vanilla, freight and payroll.

The DIP, priced at 11.5%, would mature on the closing of a sale or the termination date for the cash collateral use, whichever comes first. Court papers did not specify whether the loan constituted new-money funding, and Dippin' did not file any documentation for the loan.

Brian Meldrum of Stites & Harbison PLLC, counsel to Regions, declined to comment on the financing. Debtor counsel Todd A. Farmer of Farmer & Wright PLLC did not return calls for comment.

Dippin's use of its bank accounts has also been contentious.

U.S. Trustee Samuel K. Crocker on Tuesday objected to Dippin's use of its existing bank accounts, records and cash management system, stating that Regions isn't an authorized depository and hadn't posted any additional collateral to provide protection to creditors if the bank failed. Dippin's only bank account has a balance of more than $250,000, which exceeds the Federal Deposit Insurance Corp.'s insurance limit, according to court documents. Keeping the money in the account, Crocker argued, would pose a risk to creditors of the estate.

Regions also filed a limited objection on Monday to Dippin's continued use of the bank account. Regions said Dippin's motion to use its existing bank account didn't explain its cash management system or if that system entails intercompany debiting or creditor between Dippin' and nondebtor affiliates, to which the bank would object.

Court filings did not indicate whether a hearing has been set on the issue.

Dippin' filed for Chapter 11 protection on Nov. 3. It did not specify a reason for the petition.

Dippin' founder and chairman Curt Jones invented the namesake Dippin' Dots in 1988, according to the company's website. The dots are different than freeze-dried food that astronauts eat because the products are flash frozen and can still melt.

The dots are made through the cryogenic encapsulation process that Jones pioneered. The ice cream is frozen very quickly at a very low temperature to create the beads, according to the website.

The dots are sold in theme parks, malls, fairs, festivals, movie theaters, stadiums and arenas, the website shows. Because they need to be stored at subzero temperatures, however, they cannot be stored in home freezers. The company sells them online for $30 a gallon, shipping the product in a reusable foam cooler packed with dry ice.

Dippin' has been in business for more than 15 years, according to court documents. Dippin' calls its dots a "re-invention of America's favorite frozen treat" on its website.

Charles R. Merrill, counsel to Crocker, did not return a call for comment.

Meldrum and D. Cooper Robertson of Stites & Harbison are counsel to Regions.