U.S. Trustee Judy Robbins has filed an objection to the proposed bidding procedures for Patriot Coal, including the stalking-horse bid from Blackhawk Mining, saying they would “likely chill the bidding process,” Forbes.com reported yesterday. Robbins objected to the deal’s breakup fee and potential expense reimbursements for Blackhawk that could reach as high as $24 million, as well as the level of discretion and “unfettered ability” the procedures provide to the company to determine who would constitute a “qualified bidder,” determine what information to provide bidders, and alter the bidding procedures as they see fit, “all without any real oversight or consultation except for, in limited circumstances, in consultation with the DIP lenders.” With respect to the bid protections, Robbins said that they should be denied by the bankruptcy court because the amount is excessive; the bidding process contemplates Blackhawk being permitted to credit bid the amount of the protections in an overbid, thus creating an unleveled playing field for competing bids; and the protections are triggered by termination events other than an alternative transaction, such as a failure to close the transaction by the Sept. 25 milestone deadline. A hearing on the sale procedures is scheduled for June 23.
