Loral has proposed it's fourth POR. According to Equity Committee Objections it contains legal deficiencies. Among them,
from the court record:
The Plan is unconfirmable for the following reasons, including but not limited to:
1. artificially low, non-market tested valuation of the business
2. gives up, for no reason, a valuable fraudulent conveyance, which, if avoided, would provide value to the debtors shareholders under virtually any analysis
3. violates absolute priority rule by providing for substantial distribution to certain holder of Debtor's common stock, namely senior management, on account of their current equity interests, while holders of more senior preffered stock are wiped out
4. discriminates against certain common stock holders by conveying distributions to management stock holders only
5. creditors receive more than 100% of their claims (post petition interest of 6% as opposed to the federal judgement rate of 1.1%)
6. same as above: terms of new skynet notes are not proposed in good faith, creditors to receive secured 10-year notes that bear interest at 14%. Quoting from the document "As this court is aware, a 14% coupon for a well-secured note issued bya reorganized debtor with virtually no debt is significantly above market. The only reason to set such a coupon rate for the New Skynet Notes is to surreptitiously confer additional value upon the debtors bondholders creditors."
My favorite quote: "Ltd.'s decision to issue the Guaranty (to Orion) was a guarantee for disaster..."
And " ... the Plan's proposed option package for management would bestow highly valuable stock options on management which, according to the debtor's own valuations, would be substantially "in the money" on the effective date. That distribution to management, which is supported by no consideration and can thus only be on account of their existing equity interests in the Debtors, is a blatant violation of 11 U.S.C.1129(b) and renders the Plan unconfirmable." |
