Adeptus Health Bankruptcy Objections Filed


The U.S. Trustee assigned to the Adeptus Health case, SCG Capital and PST Services filed with the U.S. Bankruptcy Court separate objections to the Company’s Third Amended Joint Plan of Reorganization.

The Trustee asserts, “In addition to the issues raised in the United States Trustee’s Prior Objection, the United States Trustee objects to the Third Amended Plan because it contains a class-skipping gift, described asa settlement in Section 5.15 of the Third Amended Plan, which purports to settle estate causes of action with holders of common stock in Adeptus Health. The United States Trustee objects to the class-skipping gift because it is not fair and equitable, because it is not in the best interest of the estates and the creditors, and because it violates 11 U.S.C. section 1129(b)(2)(B)(ii) (the ‘Absolute Priority Rule’)….Unless senior claimants receive either the full value of their claims or unless they consent to receiving less than full value, a class-skipping gift given to junior claimants in the context of a plan of reorganization violates the Absolute Priority Rule.”

In addition, “The Debtors attempted to resolve the United States Trustee’s Prior Objection and informal comments relating to the exculpation provision with the insertion of the language included in Section 11.9(b) without also removing the objectionable the exculpation provisions. The language would make sense if the Court were striking the exculpation provisions in their entirety and, instead, inserting a channelling injunction similar to those approved by the courts….In the context of the Third Amended Plan, however, Section 11.9(b) is even more restrictive than the exculpatory language originally proposed by the Debtors in the Section Amended Plan, and could be read to require parties to obtain Court authority to pursue even, for instance, routine objections to professional fee applications filed post-confirmation.”

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