Kid Brands filed with the U.S. Bankruptcy Court an objection to (i) motion of the U.S. Trustee (UST) assigned to the case for an order converting the Chapter 11 reorganization to a liquidation under Chapter 7 or, in the alternative, dismissing the cases and to (ii) the cross-motion for an order authorizing the Debtors to distribute remaining cash and dismiss the cases.
The Debtors explain, “After considering available alternatives, the Debtors and the Committee determined that a dismissal of these Chapter 11 Cases would be the most effective vehicle to achieve these goals. Earlier this year, and prior to the filing of the Conversion Motion, the Debtors and the Committee approached the UST’s Office to discuss the Debtors’ proposal for disbursement of the remaining cash on hand and dismissal of these cases and to solicit the UST’s support for same. Although the Debtors and the Committee engaged in numerous discussions with the UST’s Office, the Debtors were ultimately advised that the UST’s Office would oppose a motion to dismiss these cases. Although the UST asserts in the Conversion Motion that the Debtors ‘have failed to present an exit strategy from bankruptcy’ and thus conversion of these cases would be in the best interest of creditors, the Debtors disagree. As the UST is well aware, there are insufficient funds available to prosecute and confirm a plan of liquidation in the Chapter 11 Cases.”
In addition, “As the UST is also aware, all assets of these estates have already been administered and there are no other assets to be administered or liquidated. Conversion of the Chapter 11 Cases to chapter 7 would add an unnecessary layer of administrative costs. Other than the disbursement of the remaining cash held by the Debtors and held in the GUC Trust Account…that are proposed to be paid to the DIP Agent and certain Estate Professionals….There is nothing left to be done in these cases, as all viable Avoidance Actions have been prosecuted to conclusion and all of the Debtors’ other assets have already been liquidated. Accordingly, the Debtors oppose conversion of these cases to Chapter 7 and cross-move for authority to disburse the remaining funds held by the Committee and the Debtors in accordance with the Final DIP Order and to dismiss the Chapter 11 Cases.”
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