Cobalt International Energy’s official committee of unsecured creditors filed with the U.S. Bankruptcy Court an objection to the Debtor’s motion an exclusivity extension.
The committee asserts, “Exclusivity should not be extended for 120 days as requested by the Debtors, but rather terminated to the extent that the Debtors have persisted since the inception of these cases in pursuing confirmation of a plan of liquidation that, among its other defects, proposes to grant blanket direct and third party releases to a long list of past and present officers, directors, and controlling equity holders of the Debtors, including present and former officers and directors named as defendants in pending derivative actions belonging to the estates.”
In addition, “These releases are being given for no consideration and are simply indefensible in a liquidating chapter 11 case where even the Debtors do not receive a discharge under section 1141(d)(3) of the Bankruptcy Code. The Debtors’ assertion in their Disclosure Statement that the releases are integral to the plan that accomplishes the sale of their assets and distribution of the proceeds is unsupported by any evidence or logic, and does not withstand scrutiny….Notably, because there is no opt-out for the release of the estates’ direct claims against the present and former directors and officers, including those named in the pending Derivative Actions, if creditors are to receive their distributions, the Court must approve a plan that gives away those claims for no consideration. Leveraging creditors in this manner for the benefit of insiders, by conditioning the sale and creditor distributions upon the granting of gratuitous releases to present and former insiders for no consideration, is a misuse of exclusivity.”
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