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Niner sale delayed as new bidder emerges

Published January 16, 2018
Stalking horse bidder has stepped aside as Niner requests a delay to negotiate with new bidder

DENVER (BRAIN) — Niner has asked its stalking horse bidder — an investment group that had planned to purchase the company's assets on Wednesday — to step back as it negotiates with another potential buyer with a higher offer, company co-founder and president Chris Sugai told BRAIN Tuesday.

"We received two other bids that are called non-qualfying bids because they didn’t conform to court guidelines. One of them requested more time for us to close, but it's a higher offer," Sugai said. He said Niner's lenders are in agreement with the change in plans.

"They are happy to allow more time. We are headed to court tomorrow to get that finalized. ... This is not a bad thing for us."

Sugai said Niner will ask that the court delay the sale until Feb. 28. 
Niner Acquisition LLC, a group owned by three Colorado investors, had been working with Niner since early 2017, long before Niner's decision to file for Chapter 11 bankruptcy protection in late November. According to Niner at the time of the filing, the company planned to reorganize under the protection of Chapter 11, and then sell its assets to the group.

Niner Acquisition's three partners are also the principals in Colorado Basin Partners. The group made a stalking horse offer for the company's assets, and when no other qualified bids appeared by a deadline last week, was scheduled to close on the purchase Wednesday and bring the company out of bankruptcy before month's end.

However, Niner filed a status update with the U.S. Bankruptcy Court for the District of Colorado on Tuesday afternoon indicating that the group had dropped the offer and Niner was now negotiating with two other potential buyers.

"On January 16, 2018, debtor received notice that Niner Acquisitions, Inc., the approved stalking horse bidder, was no longer proceeding forward with its proposed purchase of the debtor’s assets. The debtor did not receive any qualified bids. The debtor did receive two separate purchase offers for substantially all of its assets. The debtor does intend to proceed with discussions in an effort to finalize an agreement with one of the proposed alternative transactions."

Earlier Tuesday, one of Niner's secured creditors, West Town Bank & Trust of North Carolina, had filed a limited objection to the terms of the sale to Niner Acquistion. Niner owes the bank $3.1 million on a loan.

WTBT did not object to the sale, but objected to the terms of the stalking horse purchase agreement, which called for the purchaser to first pay off  $2.75 million credit line that Niner held with PMC Financial Services Inc. 

According to court documents submitted by West Town on Tuesday, both banks held collateral on their loans to Niner Inc. under terms of a 2013 agreement. WTBT holds a first position lien against Niner assets including equipment, fixtures, motor vehicles, and general intangibles including intellectual property. It holds a secondary lien on other assets. Meanwhile, according to the documents, PMC holds a first position lien against Niner's accounts, inventory and investment property and a second position lien against the assets where WTBT has the first position. 

"This objection is styled as a limited objection because WTBT does not oppose the debtor’s efforts to sell substantially all of its assets as part of a coordinated auction process where all assets will be adequately exposed to the market. However, WTBT vehemently opposes the proposed distribution of approximately $3.5 million of the sale proceeds directly to PMC, as proposed in the sale motion, before this court makes a determination regarding the validity, priority and extent of WTBT’s secured interest against the sale proceeds," the bank's objection reads in part.

The bank asked that the court put all sale proceeds in escrow until the issue is resolved. 

However, a few hours later Niner filed its status update informing the court, the banks and other creditors that the stalking horse offer had been withdrawn. 

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