Bloomberg News

Black Diamond Agrees to Buy Assets of Bankrupt GSC Group

June 08, 2011

(Updates with opposition from lender group starting in sixth paragraph.)

June 8 (Bloomberg) -- Black Diamond Capital Management LLC agreed to buy the assets of GSC Group Inc., an investment- management firm in bankruptcy, in a deal opposed by lenders including UBS AG.

GSC’s assets will be sold through two transactions worth about $275 million to the company, according to a filing today in U.S. Bankruptcy Court in Manhattan by the trustee overseeing GSC.

The sale is “the best available outcome” for GSC, paying off lenders and possibly providing a “meaningful recovery” for unsecured creditors, lawyers for trustee James Garrity said in court papers.

GSC, based in Florham Park, New Jersey, filed for bankruptcy last year and agreed to sell assets to Black Diamond, an investment firm that is a lender to GSC, following an auction. A group of lenders to GSC, including Zurich-based UBS and French bank Credit Agricole SA, opposed the deal.

Garrity plans to sell most of GSC’s assets to Black Diamond in a $235.7 million deal based on the earlier auction. Black Diamond, as agent for the lenders, is bidding $224 million in debt owed by GSC, according to the filing. Other assets will be sold in the second sale.

The lender group that includes UBS opposes the new deal with Black Diamond and is pursuing its own restructuring plan for the firm, Evan Hollander, a lawyer for the group, said in an interview.

‘Small Fraction’

The Black Diamond sale pays only “a very small fraction” of the lenders’ claims, Hollander said. The deal would give GSC lenders between $24 million and $38 million in exchange for releasing about $255 million in claims under a credit facility, he said.

Under the lender group’s proposed bankruptcy plan, the lenders will receive between $173.6 million and $229 million, according to Hollander.

Garrity couldn’t be reached for comment.

The case is In re GSC Group Inc., 10-14653, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--Editors: Stephen Farr, Mary Romano

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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