Claire’s Stores and the Ad Hoc First Lien Group filed with the U.S. Bankruptcy Court separate objections to the motion of Oaktree Capital Management for entry of an order directing the Debtors to modify their marketing process.
The Debtors assert, “For more than five months, the Debtors have engaged with Oaktree in good faith to develop a viable restructuring path on a consensual basis if at all reasonably possible. The Debtors have been transparent with respect to their business, finances, and operations, and, furthermore, have paid more than $1 million on Oaktree’s behalf for legal and financial diligence. Oaktree continues to have every opportunity to present a viable proposal to the Debtors commensurate with Oaktree’s stated views on value. Oaktree has also had direct visibility into the Debtors’ efforts to solicit higher and better value in the marketplace, including by identifying potential counterparties to the Debtors—a point Oaktree does not actually dispute. Without question, Oaktree wants a higher valuation than the Debtors’ Plan currently provides, regardless of whether Oaktree is willing to underwrite that valuation. The Debtors, for their part, are actively engaging in the marketplace to determine whether higher value is available—in addition to their continued efforts to engage Oaktree on a consensual resolution if at all reasonably possible. Absent resolution on a compelling, Oaktree’s rights are still preserved. Oaktree can exercise self-help by utilizing the diligence paid-for by the Debtors to present a credible alternative and also to seek relief under the rights specifically afforded by the Bankruptcy Code… Oaktree’s rights to object to Disclosure Statement approval and Plan confirmation are also fully reserved. But Oaktree cannot put these chapter 11 cases on hold so that Oaktree can prolong its deliberation as to whether to actually commit capital in support of its stated views on value. The Bankruptcy Code is clear: the Debtors are tasked to file and prosecute a chapter 11 plan ‘as soon as practicable,’ and the Debtors are vested with the exclusive right to do so. And, to be equally clear, the Debtors’ Plan is supported by the overwhelming majority of their capital structure and provides a clear path to reorganize these chapter 11 cases—which is a stark contrast to the fate of so many retailers in chapter 11. On this record, the Debtors, as fiduciaries for all stakeholders here, do not believe that Oaktree’s ‘wait and see’ approach is a realistic path in light of the attendant risks it will unnecessarily inflict on their thousands of employees, vendors, trade counterparties, and creditors who depend on the Debtors’ continued vitality as a going concern. These chapter 11 estates should not be made hostages of fortune as Oaktree has demanded, and the Bankruptcy Code does not provide such extraordinary relief. Therefore, the Debtors therefore respectfully submit that the Motion should be denied.”
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