The contractors' legal counsel argues that the terms of the bid and the DIP facility give Penn National an unfair advantage over would-be competing bidders. Moreover, they argue that neither the DIP facility nor the sale may be approved over the objection of the statutory lienholders "as a matter of law" and, "based upon the onerous and commercially unreasonable terms proposed by the prospective buyer, the M&M Lienholders and Contractor Claimants do not consent."

Penn's proposed offer, submitted early last week, includes a $50-million purchase offer for the project and $51.5 million in debtor-in-possession financing that would be forgiven if Penn is awarded the property. The contractors argue that if the proposed stalking horse bid is approved by the court then any competing bidder--"in addition to having to repay the entire DIP Credit Facility, which includes all of the Proposed Stalking Horse's reasonable out-of-pocket expenses, accrued interest, and the 2% "Upfront Fee"--would also be required to pay an additional fee equal to 5% of the DIP Credit Facility, or approximately $2.57 million as the price of admission, before the breakup fee is even taken into account.

"The Sale Motion anticipates that the stalking horse bid will repay the Proposed Stalking Horse the entire value of the DIP Credit Facility from first dollars of any bid such that, despite a competing bidder having to post a bid of $105 million or greater, the Proposed Stalking Horse gets to credit bid its $51.5 million priming lien. First priority, statutory lienholders, however, are precluded from placing a credit bid that counts as a 'qualified bid' unless they hold a judgment or order that determines their liens to be in first position as a matter of law.