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Constellation Enterprises Objection Filed

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The U.S. Trustee assigned to the Constellation Enterprises case filed with the U.S. Bankruptcy Court an objection to the Company’s motion for entry of interim and final orders authorizing the Debtors to obtain post-petition secured financing, authorizing the Debtors to use cash collateral and scheduling a final hearing.

The objection asserts, “The Debtors have apparently entered these cases administratively insolvent. Absent an agreement by the lenders to fund all administrative expenses, including all pre-sale claims of employees under the self-funded health insurance plans and all post-sale administrative expense claims, these cases may be run solely for the benefit of the secured lenders at the expense of administrative claimants….In the present case, the Debtors’ DIP budget does not ensure the payment of Zero’s employees health claims that accrue post-petition but are often not processed and paid for several months. Unlike the Debtors’ professionals–who are ensured payment of their accrued but unpaid professional fees via the carve-out, the DIP budget only includes, upon information and belief, the payment of health claims actually processed during the budget period.”

The objection continues, “Absent such agreement, these cases are administratively insolvent and must be converted to cases under Chapter 7. Administrative claimants, including employees, cannot be required to fund these cases for the benefit of the lenders.” Read more bankruptcy news.