Hampshire Group Bankruptcy Objection Filed


The U.S. Trustee assigned to the Hampshire Group case filed with the U.S. Bankruptcy Court an objection to the motion of the Debtors and official committee of unsecured creditors for an order approving the Disclosure Statement on an interim basis and scheduling a combined hearing on final approval of the Disclosure Statement and confirmation of the Joint Chapter 11 Plan of Liquidation.

The Trustee asserts, “The Debtors are no longer operating. According to Balance Sheet as of July 1, 2017, included in the most recent Monthly Operating Report (D.E. 307, ‘June MOR’), the Debtors report ‘Accrued & Other Liabilities,’ reflecting Chapter 11 professional fees and expenses, of $1.985 million, but Total Assets of only $1.797 million. The Disclosure Statement at page 11 states: ‘The Debtors’ Assets at this time primarily consist of Cash, the Debtors’ remaining unpaid accounts receivable, any recoveries related to the issuance of the Bond and the related letter of credit draw, any federal or state tax refunds, and Causes of Action.’ The Plan has been filed pursuant to Local Bankruptcy Rule 3017-2. This rule is designed to provide an expedited confirmation procedure, but only if the proposed plan is a liquidation plan that complies with 11 U.S.C. section 1129(a)(9), the value of the estate is less than $25 million, and the plan has no discharge provisions or third party releases.”

In addition, “The Plan proposes to create multiple reserve funds from the Debtors’ cash, including a $30,000 401(k) Termination Reserve and a $250,000 Post-Effective Date Trust Expense Reserve of $250,000, for a total of $280,000. These reserves would be funded from the Debtors’ cash on hand on the Effective Date or shortly thereafter, leaving approximately $500,000 to distribute. This amount is significantly less than approved and unpaid professional fees. The Plan proposes that it will be administered by a Liquidation Trust Agreement that is attached to the Disclosure Statement. Neither the Plan nor Liquidation Trust Agreement provide for any post-confirmation oversight or reporting. The Disclosure Statement does not disclose the compensation the Liquidation Trustee will receive.”

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