At Home Group’s unsecured creditors’ committee, represented by Pachulski Stang, filed an objection opposing the approval of the final DIP order, signaling that they may challenge the company’s 2023 liability management exercise.

Whether or not they do so — and whether they are ultimately successful in litigating such a challenge — may have important implications for the viability of double-dip transactions in the LME space and we at 9fin thought it worthy to explore that transaction in greater detail and the potential bases on which challenges may be made.

In addition to objecting to the fees, which it characterizes as “excessive” and including “every conceivable category of fee that could be charged,” and the DIP milestones, which it characterizes as “unduly short”, the objection included many of the issues typical in UCC DIP objections — that the section 506(c) surcharge, marshaling, and “equities of the case” waivers are inappropriate, that the 2:1 roll-up has the potential to harm unsecured creditors by encumbering previously unencumbered assets, and the proposed $75,000 budget for the UCC to investigate causes of action was insufficient.