USA Springs clears final hurdle in bankruptcy court

USA Springs has cleared the last major hurdle in bankruptcy court, thanks to a $16.6 million advance from Malom Group, its newfound Swiss financier, enabling it to pay off creditors who might object to the $60 million reorganization plan by the beginning of October.That would enable the company to renew work on its controversial bottling plant in Nottingham after the effective date, which happened to fall on Halloween, a scary prospect for diehard opponents of the plant who said they were worried about foreign interests getting control of local water supply to sell overseas. Opponents also claimed that the company’s optimism about the worth of its assets and permits is wildly inflated.But Joseph Micelli, the Malom Group compliance officer who flew in from Las Vegas to attend Thursday’s bankruptcy hearing, said the plant was economically viable. He also maintained that withdrawing 300,000 gallons a day from a 10 million gallon aquifer was “insignificant” and that using that water to create jobs was preferable than just allowing the water to be “dumped” in the Atlantic Ocean.Bankruptcy court Judge J. Michael Deasy said he expected that he would approve (after some details were spelled out) the company’s latest plan, including the bridge loan from Malom which he joked was a “creditor evacuation plan.”The bridge loan caused Roswell Commercial, the mortgage holder, to drop its objection to the plan. Roswell, which will get slightly more than $10 million back on the deal, will give up another $2 million in claims. And the unsecured creditors will drop their claims against USA Springs and Roswell to guarantee 100 percent repayment on their claims. Insider creditors agreed to sign waivers, meaning they will be paid back at a later date.The latest plan had already carved $16.6 million for the non-insider creditors out of the $60 million structured notes that Malom hoped to place, but before the latest amendment those creditors would be first in line when the deal closed at the end of October. Now, the creditors will get the cash upfront a month before the deal closes, though USA Springs attorney Alan Braunstein repeatedly said that Malom was confident that there would be no impediments to the deal.”Providing a bridge loan of this size is proof that they are confident,” said Deasy, who added that getting this project back on track was “fairly remarkable” considering the economic uncertainty.Under the plan, the reorganized company (which would consolidate several trusts and New Hampshire corporations into USA Springs, incorporated in Delaware) will remain under the control of its president, Francesco Rotondo. Malom – after a USA insider coughed up $1.2 million to be paid back with a potential $600,000 success fee – would issue some $60 million in structured notes to be paid back in seven years. (In addition to the $1.2 million, Malom would get its own success fee of 1.5 percent of the notes’ maturity face value, 3 percent of the principal funding amount.)According to the filing, the developed land would be worth anything from $22 to $43 million, with water rights worth approximately $100 million.Rotondo and his backers have spent $17 million since Rotondo formed the company in 1997, but it took nearly a decade to overcome the opposition of residents to state and federal permits.The company ran out of money and filed for Chapter 11 bankruptcy in 2008, with the 176,000-square-foot bottling facility 45 percent complete.In addition, there are water “preliminary” contracts and letters of intent totaling $650 million in place for over a decade with the following entities: the International Organization for Diplomatic Relations in Malta; Martini & Rossi, and the presso Hotel Escuela.”We are concerned that an international group will have access to our water with the protection of trade agreements,” said Denise Hart, a spokesperson for Save Our Groundwater, one of the plant opponents.Opponents also contended that several town and state permits have lapsed, and that the viability of the project is in question. Nottingham Town Manager Charlie Brown did say the town building permit has lapsed, but said there shouldn’t be much problem getting a new one.State officials have said similar things in the past.If the town denied a building permit, it could kill the project, admitted Micelli, but in doing so the “there would be a loss of employment” and “anybody who is reasonable would understand the benefits” of the project. Micelli said that the project would start working on its permits after November and hope to have it completed in June 2012. –BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW

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