Patriot National’s official committee of unsecured creditors and Trinidad Navarro, Insurance Commissioner of the State of Delaware, filed with the U.S. Bankruptcy Court separate objections to Debtors’ Disclosure Statement.
The committee asserts, “As the Debtors are proposing to confirm their pre-arranged chapter 11 plan in less than a 90-day period from the Petition Date (against the backdrop of an RSA that has been in place since November 2017), one would think the Disclosure Statement would contain a plethora of information about, among other things, litigation claims, proposed releases (including the justifications therefor), prepetition sales efforts, post-emergence financing facilities, and, at a minimum, estimated creditor recoveries. Unfortunately, the Debtors failed to file such a disclosure statement and instead, filed a seemingly placeholder disclosure statement (and patently un-confirmable plan) in an effort to meet impractical case milestones mandated by their pre- and post-petition lenders. The Committee submits that rather than force these estates to bear the expense of a contested disclosure statement hearing and litigious plan process, time and money would be better spent negotiating a confirmable plan and a disclosure statement with adequate information.
One of the many shortcomings of the Disclosure Statement, even as amended, is the lack of adequate information regarding the myriad of prepetition litigation as well as the pending causes of action against Cerberus Business Finance, (‘Cerberus’) and the Debtors’ proposed releases of those claims without any stated justification. Indeed, where the only proposed recovery for unsecured creditors in these cases is based upon the transfer and successful prosecution of estate causes of action, the lack of any disclosure regarding the proposed release of any and all estate claims against Cerberus—a named defendant in prepetition derivative shareholder litigation—is of major concern for the Committee. Also strikingly absent from the Disclosure Statement is any substantive discussion regarding the Debtors’ prepetition sale efforts (the only references to prepetition sale efforts are relegated to a mere five sentences).…Such a discussion is undoubtedly warranted because, among other things, as recently as November 2016, the Debtors received an unsolicited offer to purchase the Company for $475 million. Not only was this offer rejected, but the next day, the Debtors determined to enter into the $280 million secured financing facility with Cerberus, which refinanced and recapitalized the Debtors while providing handsome dividends and payments to the Debtors’ officers, directors and largest shareholders. Creditors entitled to vote on the Plan should be provided, at a minimum, with information as to the details of the offer, why it was rejected and who rejected it.”
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