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April 24, 2019 – The Debtors' Official Committee of Unsecured Creditors (the “Committee”) objected [Docket No. 331] to the Debtors’ Disclosure Statement, arguing that it is woefully inadequate as to information on the Recapitalization Transaction and amounts to nothing more than a "placeholder" for a "patently unconfirmable Plan." The Committe is not reticent as to where blame for lies, Silver Point, and further asks the Court to require the Debtors and Silver Point "to engage with the Committee to develop a negotiated plan and disclosure statement that is fair to all stakeholders, provides adequate information, and can be confirmed with a minimum of litigation expense."
The objection states, “As this Court is well aware, the Recapitalization Transaction, the acknowledged lynchpin of these Chapter 11 Cases, is the subject of pending discovery and investigation by a variety of creditor constituencies, including the Committee. Yet, as the lynchpin, the Plan proponents – Silver Point and the Debtors – tellingly admit that it is important and appropriate for all stakeholders to investigate the Recapitalization Transaction because ‘we don’t know what we don’t know.’
Against this backdrop, one would think the Disclosure Statement contains a plethora of information about, among other things, the November 2017 Equity Cure, Recapitalization Transaction, proposed third party releases (including the justifications therefor), prepetition marketing processes, and, at a minimum, estimated creditor recoveries.
Unfortunately, the Debtors failed to file such a disclosure statement. Instead, the Debtors filed a placeholder disclosure statement and patently unconfirmable plan—all in the midst of contentious Rule 2004 discovery regarding the Recapitalization Transaction—in a transparent effort to meet impractical case milestones mandated by a prepetition Restructuring Support Agreement that was entered into with the support of only one creditor: Silver Point.
As a result, the Debtors are seeking this Court’s approval of an inadequate Disclosure Statement for a Plan that, unless substantially revised, is poised to expose the Debtors’ estates to protracted litigation. Instead of proceeding with solicitation of the Plan at this time, the Committee respectfully submits that the Motion should be denied and the Debtors and Silver Point be required to engage with the Committee to develop a negotiated plan and disclosure statement that is fair to all stakeholders, provides adequate information, and can be confirmed with a minimum of litigation expense.
Even if the informational deficiencies discussed herein could be remedied with appropriate disclosures, the Motion should still be denied as the Plan is unconfirmable as a matter of law. Courts have long acknowledged that solicitation of a Plan that is unconfirmable on its face wastes estate resources and, in such instances, courts have not authorized solicitation of the Plan to proceed. Although the Committee understands that this is a difficult standard to meet, this Plan meets that standard for multiple reasons.”
The Court scheduled a hearing for May 1, 2019 to consider the objection.
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