PMC MARKETING CORP

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO
In re: :
:
PMC MARKETING CORP., : Case No. 09-02048 (GAC)
a/k/a Farmacias El Amal :
a/k/a COD DRUGS, :
:
Debtor : Chapter 11
___________________________________:
:
YMAS INVENTORY MANAGEMENT, CORP. : Case No. 09-02049 (GAC)
a/k/a Farmacias El Amal :
a/k/a COD DRUGS, : Chapter 11
___________________________________:
DECISION AND ORDER
At a hearing held on May 1, 2009, the Court granted the
debtors’ request to treat Cesar Castillo, Inc. (“Castillo”) as a
critical vendor and authorized the debtors to make payment on
Castillo’s prepetition debt and to obtain post-petition supplies
pursuant to credit terms negotiated between the debtors and
Castillo. The Court limited this to a thirty day period and
limited the amount to $1.5M of credit to be used during this
period. The Court required the debtors to meet with the two other
main suppliers and determine whether they were able to reach supply
agreements. The Court indicated that it would consider an
extension of the order and additional financing along the same
terms, if after the thirty days the debtor and the two other
vendors were unable to reach agreement regarding post-petition
financing and sale of inventory and the Debtor was still in need of
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the inventory and the financing terms negotiated with Castillo.
This Court indicated that, as a condition to approval of any
critical vendor motion, it would require the parties to treat the
unpaid prepetition debt to Castillo as unsecured non-priority debt
in the case of default, conversion or dismissal. The Court also
indicated that the order that had been proposed and the motion
itself did not clarify whether the post-petition financing and line
of credit would be given administrative expense status and the
debtors were directed to clarify the status.
On May 13, 2009, the debtors filed a motion in compliance with
the Court’s order of May 1, 2009 and requested an extension of the
bench order. The debtors indicated that neither of the other two
vendors expressed their willingness to supply to the debtors
pursuant to the same terms as Castillo. And the debtors clarified
that Castillo has conditioned its credit facilities to the
elevation of Castillo’s prepetition claim to administrative status,
in line with the amount of post-petition credit provided by
Castillo. The debtors requested that the amount of the credit
facility be increased to the original $7M requested or at least to
$5.8M.
The Unsecured Creditor’s Committee and J.M. Blanco filed
objections. Both object to the granting of administrative expense
rank to the prepetition debt as a condition for post petition
financing. The debtors filed a response.
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The Court concludes that the debtors are in need of financing
and that Castillo is a critical vendor and offering to supply to
the debtors on favorable terms. The Court will allow the credit
facility to be increased to $5.8M, especially considering that
neither of the debtors other suppliers are willing and able to
provide the merchandise pursuant to the same terms. However, as
the Court initially determined, the Court will not grant
administrative expense priority for Castillo’s prepetition debt.
The Court will allow the debtors to pay Castillo’s prepetition
claim pursuant to the proposed forty month schedule. And the Court
will allow Castillo to have a post petition administrative priority
equivalent to the amount of post petition credit extended. But,
this will not change the unsecured nature of the prepetition debt.
Accordingly, the debtors will be directed to file an amended
proposed order which complies with this determination. If the
debtor is unable to obtain supplies from Castillo, with the
incentives of the payment of its prepetition claim and the granting
of administrative priority to Castillo’s post petition financing,
the debtors requests to extend the post-petition financing and line
of credit will be denied.
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ORDER
WHEREFORE IT IS ORDERED that the debtors are granted five (5)
days to file an amended proposed order that complies with the
Court’s directives in this decision or the request for extension of
the bench order will be denied.
SO ORDERED.
San Juan, Puerto Rico, this 16th day of June, 2009.
BY THE COURT:
s/ Gerardo A. Carlo
_______________________
GERARDO A. CARLO
U.S. Bankruptcy Judge
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