Secured Creditor Horizon Technology Finance Corp. Objects to Cereplast’s Motion to Pay its Employees

On Monday, Horizon Technology Finance Corp. objected to the motion filed by debtor Cereplast, Inc. seeking bankruptcy court authority to pay employee wages and benefits.  As has been previously chronicled on this site, Cereplast voluntarily filed for bankruptcy protection in early February.  The bankruptcy filing was quickly followed by Horizon requesting that the case be converted to a chapter 7 case or provide Horizon with alternative relief.  Those Horizon motions remain pending.

Late last week, Cereplast responded by objecting to Horizon’s conversion motion and filing two motions of its own – one seeking the ability to pay claims of employees and the second seeking approval of a debtor-in-possession financing facility and the use of Horizon’s cash collateral.  Horizon on Monday objected to both of Cereplast’s motions (you can find information regarding Horizon’s DIP financing objection here).

A copy of Horizon’s objection to the employee motion is embedded below.  In the objection, Horizon asserts, among other things, the following:

  • “projected sales in the Debtor’s 13 week budget fail to cover post-petition payroll and direct operating costs”
  • “Paying pre-petition wages and benefits and rehiring ‘furloughed’ or terminated employees does not benefit creditors”
  • “The prospect of the Debtor borrowing funds only to suffer operating losses with no ability to repay is reason enough to deny the Debtor’s motion to pay pre-petition wages and benefits”

Links to our other blog posts regarding the Cereplast bankruptcy:

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