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May 13, 2020 – The Debtors' Official Committee of Unsecured Creditors (the “Committee”) objected to the Debtors' most recent motion to extend their exclusive Plan filing and solicitation periods, arguing that absent "sufficient funds to satisfy all administrative and priority claims," the Debtors do not have a confirmable Plan, and therefore no need for (or right to) an extension [Docket No. 1011]. The Committee also argues that shortly to be issued sales orders in respect of the Debtors' recent sales of European and North American assets are likely to include language requiring the Debtors to convert their cases to cases under Chapter 7. The Debtors filed revised proposed sales orders in respect of both asset sales in advance of a sales hearing that occurred on May 12th and resulted in the approval of both sales [Docket no. 1005]. Although those proposed sales orders certainly anticipate the possibility of conversion to Chapter 7, as at their May filing they did not require it.
Also on May 13th, and largely on the same grounds, the Committee objected to the Debtors' motion to have its Disclosure Statement approved [Docket No. 1012].
The Plan exclusivity objection states, “A second extension of the Exclusivity Periods to preserve the Debtors’ exclusive right to file a liquidating plan is unwarranted. The Court has held a hearing and granted the Debtors’ proposed sales of their businesses, and it is anticipated that the orders approving the sales will require the Debtors to ultimately convert the Chapter 11 Cases to proceedings under chapter 7 of the Bankruptcy Code. What is more, by their own admission the Debtors do not have sufficient funds to satisfy all administrative and priority claims, a requirement to confirm a plan under section 1129 of the Bankruptcy Code. Accordingly, the Debtors have failed to demonstrate that “cause” exists for any further extension of the Exclusivity Periods.
On May 12, 2020, the Court held a hearing to consider approval of the Sales. The Court approved the Sales at that hearing, and the Committee anticipates that orders approving the Sales will be entered very soon. Those sales orders will likely include language directing the Debtors to convert the Chapter 11 Cases to proceedings under chapter 7 of the Bankruptcy Code shortly after the closing of the Sales. The Debtors anticipate that the North American Sale is set to close within days and the European Sale is set to close by the end of May. The Debtors do not anticipate having sufficient funds after closing to pay all administrative and priority claims immediately, rather, the Debtors’ bankruptcy estates will hold valuable causes of action to be pursued by a chapter 7 trustee, or with the agreement of the Committee, Zohar and Bardin Hill a liquidating trust."
The Debtors contend that their second requested extension of the Exclusivity Periods is necessary to 'finalize their sale process and ensure that there are no further interruptions caused by a competing chapter 11 plan during that critical period.' However, with the sales approved and quick closings of those sales anticipated, the Debtors do not explain how allowing another party in interest to file a liquidating plan which accommodates such Sales might somehow 'interrupt' their closing."
The objection to approval of the Disclosure Statement adds: "On May 12, 2020, the Court held a hearing on the Debtors’ proposed sale of their businesses under section 363 of the Bankruptcy Code. The Committee anticipates that orders approving those sales will be entered imminently, and that those sale orders will provide that the Chapter 11 Cases will be converted to proceedings under chapter 7 of the Bankruptcy Code. The only remaining assets in the Debtors’ bankruptcy estates will be certain claims and causes of action to be pursued by a chapter 7 trustee, or perhaps a liquidating trust. The Debtors have even admitted that they do not have the liquidity to pay all administrative and priority claims at this time, a requirement for confirmation of any plan under section 1129 of the Bankruptcy Code.
These recent developments are not adequately disclosed in the Disclosure Statement. What’s more, given the approval of the sales and the anticipated conversion of the Chapter 11 Cases, the Disclosure Statement should not be approved and the Disclosure Statement Motion should be denied."
A hearing on the objections is scheduled for May 20, 2020, with objections due by May 13, 2020.
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