Horizon Technology Finance Responds to Cereplast Motion, Asserts Failure to Comply with Interim DIP Financing Order Obligations

As we previously reported, on Friday Cereplast, Inc. asked the S.D. Indiana bankruptcy court to continue the March 20th hearing scheduled in the case to March 26th.  In Cereplast’s motion, the company asserted that its pre-petition secured creditor Horizon Technology Finance – which is seeking to have the chapter 11 case converted to chapter 7 – refused to consent to the continuance of the hearing date.  On Monday, Horizon filed a response to Cereplast’s motion.  A copy is embedded below.

In today’s response, Horizon states that it has no objection to the continuance of the hearing, subject to three conditions being met.  By far the most interesting of those conditions is Horizon’s assertion that Cereplast has failed to comply with certain obligations which Bankruptcy Judge James Carr imposed in his order granting Cereplast interim access to its proposed debtor-in-possession financing facility.  Specifically, paragraph 2(b) of Judge Carr’s order required Cereplast to do the following (for clarity, the term “debtor” in the quote below refers to Cereplast):

On March 11, 2014 and March 18, 2014, the debtor shall provide Horizon with a statement showing for the period from February 10, 2014 (the “Petition Date”) through the end of the prior week: advances of the Emergency DIP Financing, collections of receivables, salable inventory located in the United States (for raw materials, work in process and finished products), aged receivables balances (based on 30, 60 , 90 and greater than 120 days), and actual expenses as against expenses in each line item of the Budget.

In today’s response, Horizon asserts that, as of the morning of March 17th, Cereplast had not provided the statement that it was supposed to prepare by March 11th:

Pursuant to the Interim Order,the Debtor was required to provide Horizon with a report as more particularly described therein on March 11. Interim Order, ¶2(b).  As of this filing, the Debtor has not provided Horizon with the March 11 report. The next report required by the Interim Order is due tomorrow. Id.  The Debtor should continue weekly reporting through the March 26 hearing date.

The fact that Cereplast was delinquent in providing these statements was suggested by the exhibits to Cereplast’s own motion on Friday.  In a letter from Cereplast’s counsel to Horizon’s counsel, the required reporting was mentioned:

Report Pursuant To Paragraph 2(b)
The debtor is working on this and we will have something to you shortly. Please understand Mr. Okada is the only individual working on the accounting and he can only accomplish so much on any given day.

To see the other two conditions upon which Horizon will consent to a continuance of the hearing date, please see the embedded copy of the response below.

Links to our other blog posts regarding the Cereplast bankruptcy:

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