Another hearing, another USA Springs deal



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USA Springs has reworked a deal that would allow for it to go ahead with its controversial bottling plant in Nottingham, thanks to Malom Group AG, a Swiss company that's ready to lend it $60 million, as well as a mystery investor who is willing to front $1.2 million with no real protection from the bankruptcy court.Another investor is waiting in the wings as well, if the Malom deal goes sour, according to a bankruptcy hearing on Wednesday in Manchester."This is a nice problem to have," said Alan L. Braunstein, the attorney for USA Springs.However, almost all parties -- and the bankruptcy judge -- were cautious about whether the deal will pan out. Malom is the third major investor pledging to bail out USA Springs since it declared bankruptcy in 2008. The Salem-based firm, lead by Francesco Rotondospent a decade and millions of dollars to win permits to withdraw hundreds of thousands of gallons of groundwater, despite tenacious opposition from some residents.These residents contend that the plant would suck their water supply dry to quench the thirst of foreign customers. They also have contacted investors, warning them that the permits won over the years may not be in place after such a long hiatus.USA Springs has countered that the permits are still valid, that the plant would be economically beneficial and environmentally benign and that the residents' contact of potential investors borders on harassment.Under the latest deal, USA Springs would set aside $16.6 million of a $60 million loan to the creditors to fully pay back most unsecured creditors with interest.That's partly because some creditors have agreed to receive less than full payment so they can continue to do business with the company. Under the new deal, USA Springs dropped its effort to "carve out" some money for its insider investor before Roswell Commercial Mortgage LLC (which holds the first mortgage on the property) gets all of its money.The Official Committee of Unsecured Creditors has already challenged Roswell's right to get first dibs in a lawsuit, in a fraud suit that also names USA Springs. Roswell - whose main objection to the deal was the carve-out - isn't sure where it stands now. To help make Roswell up its mind, the unsecured creditors -- who stand to get full payment plus interest in the new deal, as opposed to 84 cents on the dollar - offered to drop its lawsuit if Roswell goes along.The rest of the $60 million loan would be used to complete the half-finished plant.But in order for Malom to go ahead, the mysterious investor had to fork over the $1.2 million, which - according to Braunstein - it has already been done. The money, he said, went from his account to account in an international bank based in New York City, with a branch in New Hampshire.If the deal closes (and the parties are shooting for a Halloween closing date) the investor will get his or her money back, along with a $600,000 success fee, plus administrative expenses. If it doesn't, the investor will only get $50,000 for fronting the money.Braunstein was emphatic that the investor's name be kept confidential, except to the parties involved. There are five other proposals to front the money, each seeking success fees from $800,000 to $4 million -- including one who is one-third owner of an NFL franchise. The deal offered by the unnamed inside investor (who also is a mortgagee to the land the plant would be built on) would save some money and would allow the project to stay on track.In agreeing to allow the investor's name to be kept confidential, Judge J. Michael Deasy said he would go along as long as other parties didn't have a problem with the investor, and "there is no South Boston connection" he joked, an allusion to James "Whitey" Bulger, the recently apprehended Boston mobster.Braunstein assured Deasy there was no such connection, and stressed the feasibility of the deal. Malom -- with 600 million euros tucked away in banks in Spain, Germany and Switzerland -- would have no problem selling bonds in the project to private investors, Braunstein said. Once the plan is filed (by July 15) and approved (a hearing was set for Aug. 25), the money should be in USA Springs' coffers and the creditors would be paid off, said Braunstein.Just in case it doesn't go through, however, Lower Falls Funding LLC was on speakerphone.USA Springs has fronted that company $137,000 for a $55 million loan -- a deal that fell through when the affiliated Bet-J Capital LLC didn't come up with the cash on time, according to Braunstein.USA Springs threatened suit and switched to Malom, which promised creditors $16.6 million, as opposed to the $12 million offered by Bet-J Capital.But Lower Falls said it has a new financial backer: CB Richard Ellis Group Inc., one of the nation's largest real estate firms, with more than $4 billion in revenue.But, said Braunstein to NHBR: "Too little too late."Nevertheless, remarked Deasy in the courtroom, since USA Springs has had a "history of being unsuccessful" of pulling out of bankruptcy, "if past is present, you (Lower Falls) might have another shot." -- BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW Edit ModuleShow Tags