Wells Fargo Bank Northwest and ALF VI (together, the “Residco Parties”) filed with the U.S. Bankruptcy Court an objection to Republic Airways Holdings’ Second Amended Joint Plan of Reorganization.
The objection asserts, “The Residco Parties have interposed this Objection to address the uncertainty and extreme prejudice created by the proposed substantive consolidation provisions contained in the Proposed Plan. The Residco Parties object to the attempted substantive consolidation here because such the proposed consolidation may cause Residco’s less risky (and hence potentially more valuable) guaranty claims to be expunged, while the riskier and potentially smaller lease claims survive, which result would cause material harm to the Residco Parties.”
In addition, “Specifically, under New York law the standards for allowance of guaranty claims based upon liquidated damage provisions are different than the standards for allowing such lease rejection damage claims, which differences could lead to a claims differential of over $50 million. Accordingly, the Residco Parties hereby request that this Court resolve the unclear application of the substantive consolidation provisions where a primary claim and a guaranty claim are allowed in different amounts by treating the allowed amount of such claims as the average of such two claims. If this Court accepts such proposal, then the Residco Parties’ objections to the Proposed Plan would be fully resolved.”
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