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Bankruptcy Keyed to Levitan, 3rd Ed.
Cohen v. KB Mezzanine Fund II, LP (In re SubMicron Systems Corp.)
Citation:
432 F.3d 448 (2006)Facts
SubMicron Systems Corporation designed and manufactured equipment for the semiconductor industry but experienced significant financial difficulties by 1997. To sustain operations, SubMicron secured financing from several institutions, including a $15 million working capital facility from Greyrock Business Credit and $20 million in senior subordinated notes from KB/Equinox and Celerity (collectively, “the Lenders”). Despite these capital infusions, SubMicron continued to struggle, recording a $47.6 million net loss in 1997. In 1998, SubMicron issued additional notes to the Lenders, but its financial health continued to deteriorate. By 1999, SubMicron required further financing and received approximately $11.2 million from the Lenders through various notes and direct funding. By mid-1999, KB/Equinox and Celerity employees constituted three-quarters of SubMicron’s Board. In July 1999, SubMicron began acquisition discussions with Sunrise Capital Partners, which created Akrion LLC as the acquisition vehicle. Under the deal structure, the Lenders agreed to contribute their secured claims to Akrion, which then credit bid these claims as part of its $55.5 million bid for SubMicron’s assets in a § 363 sale. The District Court approved the sale over the objection of the Creditors’ Committee.
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