Daily News: May 13, 2013

Oreck Files for Bankruptcy, Seeks DIP to Payoff Wells Fargo

Oreck, a manufacturer of upright vacuums and cleaning products, has filed for Chapter 11 bankruptcy protection, and could reach an agreement to sell its assets in a matter of days, according to bankruptcy court filings. Oreck is owned by asset management firm Black Diamond Capital Management.

According to the filings, all Oreck assets are subject to a lien securing a $20 million revolving line of credit provided by a pre-petition lender group led by Wells Fargo, as administrative agent. Assets are also subject to a lien securing a $5.5 million revolver provided by Broadpoint Products, as administrative agent for pre-petition second lien lenders.

The documents show that Oreck is seeking court approval to enter into a DIP financing facility of up to $11 million from certain lenders led by Black Diamond Commercial Finance as administrative agent. The purpose of the financing is to support a potential sale of the company as a going concern and thus avert a liquidation and wind-down. According to the filings, a key provision of the DIP financing it that a portion will be used to purchase pre-petition first lien lender debt with the balance to be used to cover amounts under an established budget.

According to court filings, Oreck, along with eight affiliated entities that filed for Chapter 11, “are in a precarious financial position.” The company is losing money, sales “are quickly deteriorating,” the filing states, and it “simply cannot generate cash fast enough to cover expenses as they arise.”