Will Solo Net Enough From The Old HQ Auction?

Solo's former HQ (in Highland Park, Illinois, on Deerfield Road), coupled to a manufacturing and research facility, is being sold at auction after a deal with an Annenburg affiliated JV fell through in the real estate collapse of late 2008. After Solo Cup decided to move its headquarters to Lake Forest (very posh!), it agreed to sell the Highland Park property to Annenberg and its partner, Chicago-based Monroe Investment Partners LLC, which had planned a mixed-use project there, prior to the 2008 collapse.

More on the current auction, from RE Journals, here:

. . .The property will be sold in a sealed bid convertible to an open outcry auction format. The sealed bid deadline is March 6 at 4 p.m. CT. The owner will have the option to convert the offering to an open outcry auction after receipt of the bids. An initial earnest money deposit of five percent of the total purchase price is required in order to participate.

Property inspections will be held by appointment only. CBRE representatives will be available to answer questions about the auction process and procedures, as well as the property. Detailed property information will also be available for review including the purchase and sale agreement, tax information and other applicable information. . . .

The question will be whether Solo nets enough at the auction to stay in compliance with its covenants in its debt-facilities. Could this explain the outsized pre-June 1, 2012 "sale of company" incentives, just granted to a few top Solo executives? We shall see, but I'll note that -- once the sealed bids are opened, or the live outcry auction is complete -- Solo's auditors will have a definite marker as to the FMV of the facility. If the current asset valuation of that facility is presently much higher than the bid-levels, the auditor will need to recommend that Solo take an impairment charge (in the form of a reduction of asset values, or a reduction of equity). Those reductions may throw Solo out of compliance with its debt covenants. Ouch. As I say, it all depends on whether the bids for the facility are robust enough -- and that, we shall soon see -- in about ten days' time.