A New Jersey bankruptcy judge on Monday granted interim approval for global label maker Multi-Color Corp. to tap into post-petition financing, yet he halved the amount of money that lenders can initially roll up due to concerns about the value of collateral securing some first-lien claims.

U.S. Bankruptcy Judge Michael B. Kaplan said during a hearing that he was not willing to approve the full $250 million rollup of old debt into the debtor-in-possession package in a "possibly undersecured environment," authorizing instead a $125 million rollup. He also deferred approval of half of the 3% backstop premium pending the appointment of a committee.

The debtor itself had come to court ready to ask for the immediate use of $125 million in cash — $25 million less than it was requesting on Friday — after spending the weekend trying unsuccessfully to reach an agreement with objecting creditors led by Canyon Capital Advisors LLC, debtor's counsel Steven N. Serajeddini said during the hearing.

Canyon, via ad hoc groups of cross-holders and excluded first-lien lenders, had argued the financing would improperly reallocate value from unsecured creditors to MCC's favored lenders and its controlling private equity sponsor Clayton Dubilier & Rice LLC. They also said the DIP package would ensure a predetermined restructuring outcome rather than serve the best interests of MCC's estate.

Judge Kaplan said he understood the concerns but overruled their objections on Monday.

Bruce Bennett, counsel for the objecting cross-holder group, said during the hearing that he would immediately appeal and hopes to bypass federal district court and go directly to the Third Circuit.

Atlanta-based MCC produces labels for a broad range of automotive, pharmaceutical, beauty, laundry, food and other consumer products, including pressure-sensitive labels on Presidente beer bottles that can withstand submersion in ice-cold water and Hellmann's mayonnaise labels made from recycled plastic, according to its website.

It has over 12,000 employees in 25 countries and over 90 facilities, Chief Restructuring Officer Garrett Gabel said in a first-day declaration. It hopes to trim $3.9 billion from its balance sheet through bankruptcy.

MCC filed for Chapter 11 on Thursday with a restructuring support agreement and a pre-packaged plan in hand. Its original DIP agreement provided for $250 million in new money, with $150 million becoming available upon interim court approval, as well as a $250 million rollup of first-lien claims. The DIP package also included a $7.5 million backstop premium and $150 million in incremental funding, according to court filings.

After a six-hour court hearing on Friday, Judge Kaplan allowed MCC to access up to $45 million of its cash collateral and DIP proceeds so that the company would have enough money to function, but he delayed a full ruling on the interim request until Monday.

Fearing over the weekend that MCC might not be able to reach an agreement with objecting lenders, the debtor worked with its fronting bank to create a path forward so that overseas payroll could still go out on time, including by reducing MCC's interim funding request to $125 million from $150 million, Serajeddini said in court on Monday.