Another bid to salvage USA Springs plan emerges

The deal to revive USA Springs’ controversial bottling plant in Nottingham and Barrington has fallen through, but the bankrupt company has come up with another plan to borrow $60 million raised by a Swiss company, called the Malom Group AG.
The catch is that Malom wants $2.4 million up-front to pay for the loan’s expenses. Meanwhile, USA Springs will sue the original company, Lower Falls Funding LLC, for the deposit it made on a loan that never materialized.Meanwhile, some non-shareholding creditors could get all of their money back under a new plan – agreed to on April 22 and filed in bankruptcy court on May 18. Previously, they would only get 84 percent of it back on the old plan.USA Springs, led by Francesco Rotondo, has spent more than a decade to get the necessary permits to withdraw enough water for a bottling plant over community opposition. Critics charge that USA Springs would use so much groundwater that there wouldn’t be enough left for residents. The company received permits to run the plant, but ran out of money and filed for Chapter 11 bankruptcy in June 2008, leaving the plant half-finished.The first deal to salvage the plan was proposed in April 2010 and approved by the bankruptcy court in October. It would have resulted in a five-year, $55 million loan from Lower Falls Funding LLC, which would have acquired a 20 percent stake in USA Springs, along with 6.5 percent interest with two points. But Lower Falls wanted $137,500 from the company. At first, the Committee of Unsecured Creditors said it was concerned that the creditor was a scam artist, but then withdrew its objections and put an adversary filing charging USA Springs with fraud on hold.However, the Lower Falls deal floundered, and in its latest filing USA Springs promised it would file a lawsuit against Lower Falls Inc. of Albany, N.Y., and Bet-J Capital LLC, based in Warner, for “breach of certain loan commitment documents.”The suit also would be aimed at Lower Falls principal and guarantor David Mazzeo. Any recovery would go to pay the third party that fronted the money for the deposit, which totaled $137,500.The Malom deal would require even more money up front. Malom would underwrite a structured note, but it would be necessary for a third party to invest and deposit $2.4 million “to be used for the due diligence and associated costs for duties Malom will perform for the debtor.”Malom, in turn, would refund the money plus an additional $100,000 if the transaction isn’t consummated.However, “in the event Malom is not successful in fully subscribing the offering and the amount to be subscribed to is less than $60,000,000, the Debtor in its sole discretion may agree that such partial subscription is sufficient to satisfy the Debtor’s intended purpose,” according to USA Springs’ filing.Malom would issue its funding commitment 55 days after it gets its deposit. The note would be 420 basis points over comparable U.S. treasuries and must be paid back in five years. Malom would get a 3 percent origination fee and a 1.5 percent “success fee,” not to mention the $2.4 million underwriting fee.Closing would be 90 days after Malom receives the underwriting deposit.USA Springs has until June 20 to present the plan in further detail at a hearing, or it could be removed from bankruptcy protection, allowing its major creditor Roswell Commercial Mortgage LLC, to foreclose on the property.Roswell opposed the previous plan, though in this plan the debtor would seek to pay $9.5 million plus 4.5 percent interest from January 15, 2011. As of May 26, no objection to the current plan has been filed.Malom is registered in Baar, Switzerland. Hans-Jurg Lips is president and board chairman and Martin Schlaepfer is a longtime board member. The company formerly went under such names as Acetrax Group AG, NAS Card Services AG, NAS Immobilien AG and Welorex SA.According to the USA Springs filing, Malom is represented by Joseph Micelli, and the plan would be evaluated by Eric A.W. Danner (CRG Partners).Bob Sanders can be reached at bsanders@nhbr.com.