BREAKING NEWS: U.S. government, EPA, and 10 states object to Exide’s request to sell or abandon certain assets – including contaminated property – without further approval from bankruptcy court; According to Exide, company owns more than 60 U.S. properties, many of which could require funding for environmental cleanup or compliance

By Matt Chiappardi

Law360, Wilmington (August 13, 2013, 8:20 PM ET) — Government environmental regulators are again at odds with Exide in the company’s bankruptcy case, this time objecting Monday to a request by the battery manufacturing giant to allow procedures to sell or abandon certain assets without further approval from the court.

(CLICK HERE TO SEE COPY OF EXIDE’S MOTION)

(There will be a court hearing on Exide’s request at 1 p.m. EST on Thursday, August 15, 2012, at the U.S. Bankruptcy Court in Wilmington, DE.)

The U.S. government on behalf of the Environmental Protection Agency filed an objection in Delaware bankruptcy court, contending that Exide’s request has the potential to include contaminated property and arguing that courts are not permitted to allow assets be abandoned without conditions protecting public health and safety.

“While debtor’s motion might be appropriate in other cases that do not involve a debtor that owns contaminated property, it is not proper in a case where the debtor owns more than 60 properties that may have environmental contamination,” the motion states. “In addition, it is important that the purchasers of contaminated property from the debtor understand that their purchase under [the Bankruptcy Code] is not free and clear of the obligation to comply with environmental law as the
owner of contaminated property.”

The feds, who are joined by environmental regulatory agencies from 10 states in their objection, say they got their 60-property tally from remarks made by Exide representatives at a July 24 bankruptcy court hearing in the case, when the company noted it owned more than 60 properties, many of which could require funding for environmental cleanup or compliance, according to the motion.

At that hearing, Exide battled with the agency over final approval of the company’s $500 million post-petition loan, which the feds argued included budget terms that left no wiggle room to quickly respond to an emergency, potentially sticking the government with the bill.

U.S. Bankruptcy Judge Kevin J. Carey overruled the government’s objection, deciding the debtor-in-possession loan did provide enough flexibility for emergency response and that nothing in the evidence he was presented suggested Exide would act irresponsibly.

But the feds argued Monday that while Exide took the position, its DIP loan would allow it to comply with its environmental responsibilities while managing its estate, it quickly requested permission to sell or abandon some assets without court oversight, the government’s motion states.

The feds’ concerns stem from a motion Exide filed July 25, seeking permission to sell assets that are less than $500,000 without further order from the court or notice to other parties, and sell assets valued between $500,000 and $5 million with the requirement to let only the U.S. Trustee’s Office, creditors’ committee and certain other interested parties know.

If Exide can’t find a buyer at a price greater than the cost of liquidation, it seeks permission to abandon the property without objection from the notice parties, and after paying any fees connected to the act, according to the company’s motion.

Exide’s motion does not indicate which assets would be on the chopping block, just seeks permission to establish procedures for the transactions if they are needed, according to the document.

The feds argue that such permission would allow the company to sell or abandon property without the EPA or state regulators getting guaranteed notice, and could apply to assets whose value has degraded below the $500,000 threshold because of environmental contamination, the government’s motion asserts.

Representatives for Exide did not immediately respond to requests for comment Tuesday.

The Georgia-based company, one of the largest producers of lead batteries for the industrial and transportation markets, filed for Chapter 11 protection June 10, citing rising production costs, intense competition and reduced access to credit.

The company’s non-U.S. operations were not included in the filing and continue to operate without the court’s supervision, according to Exide.

Exide is represented by Kenneth S. Ziman, J. Eric Ivester, Sarah M. Ward, Peter Atkins, Anthony W. Clark, Christine W. Kim and James J. Mazza Jr. of Skadden Arps Slate Meagher & Flom LLP.

The case is In re: Exide Technologies, case number 1:13-bk-11482 in the U.S. Bankruptcy Court for the District of Delaware.

–Additional reporting by Jamie Santo. Editing by Richard McVay.

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