ESP Resources’ official committee of unsecured creditors filed with the U.S. Bankruptcy Court a motion for conversion of the Company’s Chapter 11 reorganization to a liquidation under Chapter 7.
The motion explains, “The Debtors in this case have no prospect of rehabilitation. At best, a placeholder liquidating plan providing releases to all insiders has been filed to preserve exclusivity. This case is simply the use of the bankruptcy courts as a convenient foreclosure forum for the benefit of the secured creditors and the professionals. There is no provision for any recovery whatsoever for unsecured creditors in this case. Unsecured creditors will receive nothing under the current proposed liquidating plan. The assets will not bring anywhere near the secured debt of the second and third lien holders, which hold a combined principal indebtedness of approximately $4,000,000. Additionally, the added expense of the investment bankers sought by the Debtors will, if they find a buyer, assuredly reduce the available funds by no less than $320,000.”
In addition, “Essentially, this case is existing in Chapter 11 solely for the principals’ hopes that some portion of the withholding tax obligation owed to the IRS in excess of $1.28 million might be reduced, which is increasingly unlikely, and for the purpose of pushing a plan of liquidation providing them personal releases for any of their prepetition activities. The interest on the defaulted secured debt is increasing by approximately $25,000 each and every month further diminishing the value of the Debtors’ assets to the estate every month.”
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