from New Hampshire Business Review: December 7, 2011
For the third time in as many months, the bankrupt USA Springs has been unable to close on a $60 million loan because initial funding from its Swiss underwriter, Malom Group AG, still has not arrived.
The deal, which would enable the company to resume construction on its controversial partially completed bottling plant on the border of Nottingham and Barrington, was originally supposed to close on Oct. 3, with the arrival of $19.3 million bridge loan in the bank account controlled by USA Springs’ attorney.
But that deadline was extended twice until Dec. 2 because of financial turmoil in Europe, according to Malom. In November, Malom said it would rely on the sale of Brazilian securities to raise that initial bridge loan.
At Monday’s bankruptcy court hearing in Manchester, attorneys for USA Springs said Malom missed that deadline as well because it found “a better offer” elsewhere, and instead $7 million would arrive at the close of business Friday. The rest of the bridge loan would arrive by the end of the year, the company said.
“We want to make sure that Malom is true to its word,” said the company’s attorney, Alan L. Braunstein.
Malom received a $1.2 million loan fee in advance from an unnamed USA insider. That fee would be paid back at closing along with a potential $600,000 success fee
Braunstein said that Malom would pay extra interest and attorney’s fees for the delay, but the main creditor, Roswell Commercial Mortgage LLC, wanted to see any changes in writing and subpoenaed a Malom executive for a deposition.
U.S. Bankruptcy Court Judge J. Michael Deasy granted another extension of the deal.
“At the end of the day, it’s up to the parties to decide what they want to do, but at some point this thing has to go or not to go. I don’t know what time that is,” said Deasy.
But the judge added that Roswell and other creditors were understandably skeptical and that the whole bankruptcy rescue plan was in danger of “blowing up.”
The future of the USA Springs plant has never been certain. USA Springs has spent $17 million to build the plant since 1997, but it took nearly a decade to overcome the opposition of residents and environmental groups before the company finally obtained state and federal permits.
State regulators eventually sided with USA Springs, but the permit fight drained its resources and the company filed for Chapter 11 bankruptcy in 2008. The project has languished in bankruptcy ever since, after several other financial arrangements fell apart. Malom has been the most promising deal thus far.
Meanwhile, opponents have raised question with potential investors about to whether the permits were still valid — a claim that USA Springs cited as a reason to keep the names of the investors secret.
But the organization Save Our Groundwater filed a motion to find out the names of foreign investors, arguing that they might use international trade agreements to trump state environmental laws.
USA Springs maintains that SOG doesn’t have the standing to make its motion because it has no financial interest in the deal and is instead trying to sabotage it.
The court – at the request of both parties – put that matter off until after Friday, when it will be clearer whether the Malom deal will close after all.
Another hearing has been tentatively scheduled for December 15. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW