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rue21 Bankruptcy Objection Filed

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rue21’s official committee of unsecured creditors filed with the U.S. Bankruptcy Court an objection to the Company’s Disclosure Statement.

The committee asserts, “Without significant changes to the Disclosure Statement and Plan, the Motion should be denied….Specifically, the Debtors fail to disclose that some of their largest vendors and most factors are not currently providing trade terms to the Debtors. Support from the supply chain is critical to the Reorganized Debtors’ success upon emergence from bankruptcy. The Debtors’ financial projections require increasingly larger credit terms over time from their vendors and factors to meet their projected liquidity targets.”

In addition, “Additionally, the Debtors must modify the Disclosure Statement to: Provide a more thorough description of the distribution and treatment of the New Equity; Provide adequate information regarding the Management Equity Incentive Plan that includes the level of dilution the plan places on the New Equity; and Include certain documents with the Disclosure Statement currently reserved for the Plan Supplement that explains the Reorganized Debtors’ overall corporate structure and treatment of Intercompany Claims and Intercompany Interests.”

The objection continues, “Most notably, the Plan includes a ‘death-trap’ that would leave Holders of General Unsecured Claims 5 with no recovery should they vote to reject the Plan….Removing the coercive provisions in the Plan, negotiating trade terms with vendors and factors in good faith, ensuring payment of Administrative Claims in full, and making the other modifications under the Plan proposed herein would be a step in the right direction toward a supportable and confirmable plan, leading to a successful reorganization.”

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