US Trustee nie lubi planu RTL

U.S. Trustee Balks at CEDC-Roust Trading Securities Agreement 04/23 01:23 PM

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A U.S. Department of Justice representative is asking the bankruptcy court not to approve a purchase contract between vodka-manufacturer Central European Distribution Corp. (CEDCQ:$0.065,0$0.015,030.00%) and an affiliate of Russian Standard Group.

Roberta DeAngelis, the U.S. trustee for Delaware, said in court documents that the Bankruptcy Code prohibits this kind of contract because "CEDC's obligation to issue securities to Roust Trading Ltd. is CEDC's main obligation under the agreement."

The contract between CEDC and Roust Trading Ltd., which is owned by Russian billionaire and CEDC Chairman Roustam Tariko, is a securities purchase agreement that serves as the foundation for CEDC's restructuring. The agreement hands 100% of CEDC's equity to Roust Trading in exchange for $172 million in cash and $50 million in debt forgiveness.

Two sets of noteholders have signed off on CEDC's proposed restructuring, which pays them with the investment and new notes. The plan is still awaiting bankruptcy-court approval.

Ms. DeAngelis objected Monday to the contract, saying that even if the investment agreement were permitted by the Bankruptcy Code, which she says it isn't, allowing the company to put the contract into action before the court considers CEDC's restructuring plan would be "premature."

"In effect, by assuming the RTL Investment Agreement, the Debtors would be obtaining court approval for a key aspect of the Plan before a confirmation hearing had been held," Ms. DeAngelis said in court documents.

Neither CEDC nor its bankruptcy attorney was immediately available for comment Tuesday.

The company is asking the U.S. Bankruptcy Court in Wilmington, Del., to approve this contract during a hearing on April 29. A hearing on confirmation of CEDC's restructuring plan is scheduled for May 13.

CEDC filed for Chapter 11 bankruptcy earlier this month with a prepackaged plan that has more than 95% support from debtholders.

Noteholders owed $982.2 million, due in 2016, would receive $172 million in cash, $450 million in new secured notes and $200 million in new convertible notes under the plan, a recovery of about 83.7%.

Holders of notes that matured last month would receive $25 million in cash and $30 million in notes for a recovery of 34.9%. Those who don't participate in the offer would share in $16.9 million in cash.

The Mount Laurel, N.J., company, which sells vodka brands including Green Mark and Parliament in Russia and Poland and which has six manufacturing facilities in those countries, employs 4,100 people. It reported assets and debts of more than $1 billion in its Chapter 11 petition.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Write to Stephanie Gleason at stephanie.gleason@dowjones.com