Cerberus Capital Management LP said the bankruptcy filing of borrower Stanadyne LLC was “totally unnecessary” and surprising because an out-of-court restructuring was already in the works and chapter 11 costs will destroy value, WSJ Bankruptcy reported. The auto parts maker sought protection from creditors last week, saying it was “crippled” by the rising costs of $273 million of variable-rate debt owed to top creditor Cerberus after interest rates increased. During Stanadyne’s debut appearance Wednesday in the U.S. Bankruptcy Court in Wilmington, Del., Cerberus lawyer Laura Davis Jones said Stanadyne shouldn’t have filed for bankruptcy. “It took us by surprise,” she said, saying Cerberus was “a little misled.” Stanadyne faced no judgments or “liquidity wall,” nor was it in default at the time of the filing, Ms. Jones said. The company had basically agreed on a term sheet for an out-of-court restructuring, she said. Jones called the bankruptcy “value-destructive” because of the “significant fees” Stanadyne will incur in court. Judge John Dorsey asked Stanadyne representatives whether they wanted to respond. They declined, saying that it wasn’t the right time. Judge Dorsey weighed in, though. “At this point, I’ll say what my colleague Judge Shannon always says: ‘It is what it is, and we are where we are,’ so let’s just move forward,” Judge Dorsey said, referring to Judge Brendan Shannon. Stanadyne lawyer Kathryn Coleman said at the hearing that growth in the Jacksonville, N.C.-based company’s operating income couldn’t match the “explosion” in the company’s interest rates. Stanadyne intends to reorganize and will return to court seeking approval to hire an investment banker, she said.
