Multiple parties–including the U.S. Trustee assigned to the GenOn Energy case; the City of Oxnard, California; Arch Insurance Company; Westchester Fire Insurance Company; Natural Gas Litigation Midwest Class Plaintiffs; the City of Pittsburg; NRG Energy; Conemaugh Lessor Genco, Keystone Lessor Genco, Shawville Lessor Genco; Morgantown (OL1 through OL7) and ACE American Insurance Companies–filed with the U.S. Bankruptcy Court separate objections to GenOn Energy’s Second Amended Joint Plan of Reorganization.
The Trustee asserts, “The Court should not confirm the Debtor’s Plan as currently written for two reasons. First, the Plan improperly classifies Class 6 general unsecured creditors as unimpaired. The Plan provides that the general unsecured creditors are releasing claims against various third parties. They are thus losing rights under the Plan. Because any change in their rights, no matter how slight, results in impairment, these creditors are impaired, and thus have a right to vote on the Plan. In addition, even though creditors are entitled to interest on their claims if they are unimpaired, the plan is ambiguous about whether the Debtors will pay general unsecured creditors interest on their claims. The Plan states that the Class 6 creditors will be paid cash in the allowed amount of their claims, which suggests the Debtors will not pay interest.”
In addition, “The Plan, however, then states that the general unsecured creditors will receive whatever treatment is required to ‘render such Allowed General Unsecured Claim Unimpaired.’ The Plan must clarify how the Debtors will treat the Class 6 general unsecured creditors. Second, 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….Noteholders are not allowed to vote and opt-out. Instead, if they want to opt out of the third party releases, they are required to give up their statutory right to vote. General unsecured creditors are not even provided the choice to opt in or opt out by simply returning a form; instead they must hire a lawyer, file an objection, and have the attorney appear in Court to prosecute the objection. If they do not follow all of these steps, the Debtors assert that they have consented to the releases. This is not consent.”
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