The U.S. Trustee assigned to the GenOn Energy case filed with the U.S. Bankruptcy Court an objection to the Company’s Disclosure Statement.
The Trustee asserts, “The Plan does not satisfy the requirements of section 1129(a) of the Bankruptcy Code and is therefore un-confirmable. First, the Plan improperly provides broad third party releases, exculpations, and injunctions, in violation of section 524(e) of the Bankruptcy Code and applicable Fifth Circuit law. Second, the Plan and RSA improperly permit payment of administrative expense claims without disclosure or court approval, in violation of sections 503(a) and 1129(a)(4) of the Bankruptcy Code. Unless the Debtors amend the Disclosure Statement and Plan to address these deficiencies and impermissible provisions, the Disclosure Statement should not be approved.”
In addition, “The Disclosure Statement does not state what happens if the creditors file an objection and whether they must appear in Court to press their objection to avoid releasing third parties….Because the proposed recipients seek to enjoy the benefits of administrative priority under section 503 – the sole possible source of statutory authorization permitting them to be paid by the Debtors in full on the Effective Date – they must also comply with the disclosure obligations and substantive limitations imposed by that section. However, the Disclosure Statement and Plan are silent as to legal justification for the provisions requiring the fees of the Consenting Creditors to be paid.”
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