Doug,
I've read over the reasons advance by management and the unsecured creditors committee for, respectively, supporting and criticizing the reorg plan. I'm completely unimpressed with management's argument. Other than potshots at the creditors committee, management offers little of substance.
FUNDS: The unsecured creditors committee at least uses a less juvenile tone for its argument, however, there are several flaws that leave key questions unanswered. First, it would appear the committee believes funds available are insufficient to meet the objectives of the plan and serve our interest. So what? Isn't this a risk faced by every business and is especially inherent in a bankruptcy action? Moreover, did we raise this at the hearing? What was the ruling?
CURE COSTS: I can't make any sense out of B(2). Do executory contracts really have cure costs? If executory means unexecuted (i.e. unsigned and therefore unenforcable), where's the legal obligation to cure and how can there be cost associated with it?
TRUST: The committee makes good points about management's unilateral determination of the terms of the trust established for our benefit. If it's a trust, with the highest fiduciary duty known to law, I'd like to have somebody else's fingers on the purse strings. Again, did we raise this at the hearing?
OFFICER AND DIRECTOR RELEASES: I wonder about the releases. If directors could be excused from liability for failing to vouchsafe our interests, why would D&O insurance be so common? If D&O insurance exists for these individuals, are the releases being granted in exchange for settlement of outstanding claims? It does not appear that settlement funds, if any, are being held for us in trust. If not, has the committee moved the court for an order requiring this? It does no good to criticize the plan while settlement money goes floating out the door.
PLAN: The plan itself shows an extremely small revenue base compared with the massive load of pre- and post-petition debt. This is a house of cards that looks hopelessly top-heavy to me. On the other hand, I wonder if there is anything to be gained by opposing the plan and seeking to cut bait at this point?
DONE DEAL: Buried in section VII(B)(3)(b) of the plan is the fact that some of the pre-petition secured creditors get to vote twice. Certain unspecified terms and conditions were granted by management and incorporated in the reorg plan. (Wonder why they call it "disclosure" if they don't specify these side agreements...) In exchange, the secured creditors agreed to vote their Class 4 (unsecurred) shares so as to "dramatically improve" the chances that the reorg plan will be approved (2/3rds of the Class 4 shareholders required for approval).
r/s
Ben |
