PNC offers rebuttal to Mitchell Gold claims

Document bank files with bankruptcy court also objects to various first-day motions

TAYLORSVILLE, N.C. — PNC Bank fired back a rebuttal to a recently filed declaration by Mitchell Gold Co. that laid blame for its demise on the bank’s decision to not continue funding its operations.

As part of its rebuttal, the bank objects to the company’s first-day motions including post-petition financing and the use of cash collateral and the use of Debtor in Possession financing. Included in the first-day motions are requests that would allow customers to collect finished goods for which they have paid, the payment of pre-petition claims to critical vendors, and the authorization to pay certain taxes and utility expenses without having their services cut off.

“PNC assiduously disputes the narrative in the first-day declaration that seeks to lay blame at the feet of PNC for management’s ineptitude in running their business,” the Sept. 13 filing stated. “The first-day declaration intentionally presents a misleading account of events by omission of material facts.”

The filing said that the bank will address those “omissions and false allegations at the appropriate time in these proceedings.”

It went on to say that it does not approve of the DIP facility or the “priming of its liens.” A priming lien is one that is senior or equal to a lien already attached to a debtor’s assets, meaning it can take priority over money owed to the bank or other creditors.

“The DIP facility should be exposed for what it is: an attempt by the owners to put money into the company, under the guise of a subordinated loan, to obtain releases for directors and officers who designed and implemented a longstanding business model that funded operations and losses from customer deposits,” the filing said, noting that this business model predated PNC’s financing relationship with the company.

The bank said that even though the DIP financing is positioned as a subordinated facility that ranks below other loans or claims, it believes the debtors will likely seek to surcharge PNC for the “millions they intend to spend on an uncertain sale process,” adding that even though the bank is entitled to adequate protection for any drop in value of its pre-petition collateral, “the proposed DIP does not provide adequate protection to PNC.”

It said a minimum because the debtors are not currently operating and there is “no exigency for the first-day relief being sought,” the bank should be afforded more time to review and comment on the debtors’ first-day motions.

“To the extent this court is inclined to grant any relief, such relief should be conditioned on debtors returning within one or two weeks (consistent with the sale timeline shared with PNC) with expressions of interest and/or stalking horse agreements to demonstrate that the debtors’ assets can be sold in an amount in excess of PNC’s debt and sufficient to cover the costs of debtors’ process. Absent such showing this court should not entertain debtors’ otherwise speculative and uncertain process for a nonoperating business. PNC lacks confidence in the proposed sale process because debtors have already conducted multiple processes pre-petition that failed to achieve satisfactory results.”

The bank said it seeks a stay of the first-day relief in order to liquidate its collateral “in a much more efficient manner without the risk of an expensive process that lacks any guarantee of success.”

Thomas Russell

Home News Now Editor-in-Chief Thomas Russell has covered the furniture industry for 25 years at various daily and weekly consumer and trade publications. He can be reached at and at 336-508-4616.

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