Diesel USA Inc. – Files Plan and Disclosure Statement as It looks to Restructure Off the Back of Rejected Leases

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March 5, 2019 – Diesel USA filed for Chapter 11 of Reorganization [Docket No. 28] and related Disclosure Statement [Docket No. 29]. As the Debtor makes clear as to a Plan where there are no impaired classes, this Chapter 11 process is primarily about an opportunity to reject burdensome leases, a fact which will not go un-noticed by lessors of retail space. Will quick, largely pre-arranged Chapter 11s targetting leases become fashionable?

The Debtors’ Disclosure Statement notes, “The Plan comprises the Debtor’s proposal for a comprehensive reorganization of the Debtor that will (i) restructure certain of the Debtor’s obligations so that the reorganized Debtor will be financially stable and able to fulfill its ongoing business relationships with all of its constituencies, including customers, vendors, suppliers, and employees, (ii) leave all classes of Claims and Interests Unimpaired, and (iii) allow the Debtor to emerge from chapter 11 expeditiously and efficiently. 

In this case, no class of Claims or Interests is impaired under the Plan and all classes are deemed to have accepted the Plan. Therefore, there are no classes of Claims or Interests that are entitled to vote to accept or reject the Plan. The Debtor is making this Disclosure Statement available solely for informational purposes to enable Holders of Claims and Interests to determine whether to object to the Plan.”

Summary of the Plan (as detailed in the Disclosure Statement)

  • All ordinary course trade creditors of the Debtor will be Unimpaired and have their Allowed General Unsecured Claims either Reinstated or paid in full in cash with interest. In addition, Interests in the Debtor will be reinstated to preserve the Debtor’s existing corporate structure.
  • Certain executory contracts and unexpired leases will be rejected through the Plan pursuant to section 365 of the Bankruptcy Code. The counterparties for the rejected executory contracts and unexpired leases will also be unimpaired as their Allowed Rejection Damages Claims will be paid in full in cash in accordance with the relevant provisions of the Bankruptcy Code plus interest.
  • Except to the extent specifically rejected or modified through this Chapter 11 Case or the Plan, all executory contracts and unexpired leases will be assumed and all employee benefits, customer concessions, insurance policies, privacy policies, and other ongoing obligations of the Debtor will be honored after the Effective Date.
  • The Debtor will fund distributions under the Plan with currently available cash on hand as of the Plan’s Effective Date.
  • The Debtor will fund distributions under the Plan with currently available cash on hand as of the Plan’s Effective Date.

Summary of Classes, Claims, Voting Rights and Expected Recoveries:

  • Class 1 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
  • Class 2 (“Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
  • Class 3 (“General Unsecured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
  • Class 4 (“Rejection Damages Claim”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.
  • Class 5 (“Interests”) is unimpaired, deemed to accept and not entitled to vote on the Plan. The estimated recovery is 100%.

Proposed Key Dates:

  • Plan Supplement Deadline: March 28, 2019
  • Plan/Disclosure Statement Objection Deadline: April 4, 2019
  • Combined hearing to consider adequacy of Disclosure Statement and confirm Plan: April 11, 2019

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