USA Springs sets possible auction in motion

USA Springs will head to the auction block in July unless it manages to obtain a $60 million loan that has thus far been elusive.The potential lender again failed to meet its deadline Monday, according to a number of filings in U.S. Bankruptcy Court in Manchester.USA Springs, which has been attempting to build a controversial bottling plant on the border of the towns of Nottingham and Barrington, is asking the court to allow it to auction off the plant, its 300,000-gallon-a-day groundwater withdrawal permit and several land tracts owned by related companies.USA Springs has pumped millions of dollars into securing the permits in the face of tenacious opposition from some residents, who claim that the project threatens their drinking water and would use international treaties to trump environmental regulations.USA Springs has claimed that there is more than enough water and that the opposition is fueled by prejudice against foreigners, particularly Italians.In the summer of 2008, the company ran out of money and filed for Chapter 11 bankruptcy protection while it searched for a financial backer.Malom Group AG, the company’s latest potential rescuer, had promised to raise $60 million by October 2011. But the financing has faced one obstacle after another, including the detention by Swiss authorities of two of Malom’s principals relating to fraud charges against another company and Malom’s difficulty in converting to cash some Brazilian notes of dubious origin.Malom could not meet its latest deadline on Monday, April 30, because the First Trust Company of Switzerland, which was supposed to buy the notes, is in “breach of contract” according to an affidavit of Hans-Jurg Lips, one of the Malom principals who had been detained and later released.But Lips said Malom has entered a new agreement — subject to confirmation of the Central Bank of Brazil about the notes’ authenticity — which was supposed to close today, May 1.Another transaction should close around May 7, and if all goes well, USA Springs should have $7 million to $8 million of the funding shortly thereafter, and the rest in six to eight weeks.Malom’s filing on Monday asked for the deadline to be extended to May 15.That extension is backed by USA Springs, but the debtor is clearly skeptical.In a filing last week, it noted that “Malom failed to timely perform any of its obligations” and it “had serious concerns about Malom’s ability to provide the Plan Funding” leaving the company “no choice to pursue an alternative, parallel sale path.”Should the $60 million loan not come through, putting the company up for sale would be the best way to pay off creditors, primarily — after taxes and legal fees — Roswell Commercial Mortgage, which has a secured claim on the most of the property, according to USA Spring’s filing.Roswell originally lent the company about $8 million, but now claims it is owed about $13.2 million, including interest but excluding the lender’s legal fees.USA Springs has been looking for prospective buyers, so it can find one or more “stalking horses” that would put down an initial bid.Other bids would have to top the offer by more than 3 percent — the “breakup fee” that the stalking horse would be entitled to — at an auction, which would take place by July 20.Creditors have until May 9 to object to the auction. The next bankruptcy court hearing is May 14. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW

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