August 27, 2018 – The U.S. Trustee filed an objection [Docket No. 4372] to the adequacy of the Disclosure Statement filed by Toys Delaware Debtors and Geoffrey Debtors [Docket No. 4056]. The U.S. Trustee asserts, “After almost a year of navigating through Chapter 11, the Disclosure Statement and underlying Plan currently before the Court reinforce what many long-feared – administrative insolvency. Despite the inability to pay administrative claimants in full – aside from the professionals who appear to be the only ones who will emerge unscathed – the Debtors recently presented and sought approval of a settlement agreement that shielded the lenders from future litigation and created a pot of money of approximately $180 million to be shared among the administrative claimants. The Debtors have now presented – on shortened notice – a Plan and Disclosure Statement that encompasses the settlement agreement recently approved. The Plan fails to pay in full all administrative claimants and priority tax claimants and contemplates no distribution for other priority claimants – all contravention of the requirements for confirmation. In hope of getting the Plan confirmed despite these significant infirmities, The Debtors have manipulated the Bankruptcy Code requirements and sought the ‘consent’ of Administrative Claim Holders to the proposed treatment, which offers them less than what they are entitled to under the Code. This is an ambush.”
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