Hearing set on LNT waiver of DIP conditions
July 22, 2008-- Home Textiles Today,
Wilmington, Del. — A federal bankruptcy court judge is scheduled to hear arguments Thursday morning on whether Linens ’n Things may waive a portion of its Debtor-in-Possession financing that places it in default of the $700 million loan agreement.
The expedited hearing comes after LNT’s sales for the four-week periods ending July 5 and July 12 came in less than 90% of the budgeted amounts in the DIP agreement for those periods. The lenders, led by General Electric Capital Corporation, have agreed to the waiver, subject to terms.
“Debtors are seeking the entry of an order approving an amendment to the DIP Agreement that would permit debtors to obtain a waiver of certain covenant defaults that could result in the DIP lenders exercising certain available remedies under the DIP Agreement,” the company stated in court documents. “Doing so as soon as possible is important to avoid the potentially damaging perception by parties in interest, including vendors, contract parties and customers, that the DIP lenders might exercise such remedies and adversely affect the debtors’ business operations.”
Those remedies could range from terminating or limiting LNT’s use of cash collateral, to terminating the credit facility completely and calling the loan immediately. Court documents stated, “Any of these results would be devastating to the debtors’ business.”