rue21’s official committee of unsecured creditors and Woodmont Companies, DDR, DLC Management, GGP Limited Partnership, Gregory Greenfield & Associates, Jones Lang LaSalle Americas, Northwest Capital Investment Group, Regency Centers, Rouse Properties and ShopCore Properties (collectively, “the landlords”) filed with the U.S. Bankruptcy Court separate objections to rue21’s First Amended Joint Plan of Reorganization.
The committee asserts, “Notwithstanding the Committee’s general support for the Debtors’ operational and financial restructuring as a value maximizing endeavour, one element of the Amended Plan stands out as decidedly not in the best interests of creditors – the proposed release of Apax (the Debtors’ private equity sponsor) and its affiliates without providing any consideration….Moreover, because the Debtors cannot demonstrate that Apax made a substantial contribution to the Debtors’ reorganization, the Debtors’ efforts to release Apax violate well-settled Third Circuit law. Such an outcome undoubtedly prejudices creditors.”
In addition, “As to the third factor, the Apax Release is not necessary to the Debtors’ reorganization. Apax is a completely separate entity from the Debtors, and it will not have any control over the Reorganized Debtors upon their emergence from bankruptcy. Any causes of action pursued against Apax will have no impact on the Reorganized Debtors’ operations. A release of Apax, therefore, is not necessary to the Debtors’ reorganization. As to the fourth factor, the number of creditors or amount of the creditors’ claims that vote to accept the Amended Plan is irrelevant. At the time of the solicitation of the Amended Plan, the Committee Investigation was incomplete….As to the last factor, these cases will not result in the payment of all or substantially all of the creditors’ claims. General unsecured creditors will receive less than 4% of the Reorganized Debtors’ equity under the Amended Plan. This relatively low return is not a valid basis to grant the Apax Release. Accordingly, because the Debtors have failed to satisfy the Master Mortgage factors, the Apax Release should not be approved.”
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