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Toys “R” Us – U.S. Trustee Renews Objection to Third Party Release and Exculpation Provisions

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September 25, 2018 – The U.S. Trustee filed a pair of substantially identical objections to (i) the Second Amended Chapter 11 Plans of Taj Debtors and the Tru Inc Debtors [Docket No. 4935] and (ii) the Second Amended Chapter 11 Plans of Toys Delaware Debtors and Geoffrey Debtors [Docket No. 4937]. In Docket No. 4935, the U.S. Trustee asserted, “On August 27, 2018, the UST filed an extensive objection to the original disclosure statement and the solicitation procedures motion tied thereto (the “Disclosure Statement Objection”)…Several issues the UST raised in the Disclosure Statement Objection were amicably resolved through further amendments to the disclosure statement and underlying plan; some of the objections were overruled; and some of the objections were deemed to be tied more properly to confirmation….One issue raised in the Disclosure Statement Objection remains outstanding: The adequacy and legality of the proposed third-party releases and exculpation clause. The UST incorporates herein and renews his objections previously raised with respect to third party releases and exculpation provisions proposed in Article VIII.D and VIII.E of the Second Amended Plan. See ECF Doc. No. 4372. Without belaboring the argument, which was thoroughly briefed in the Disclosure Statement Objection, the UST renews his objection to the third party release and exculpation provisions as they are overly broad and inconsistent with Fourth Circuit Law and requests that the Second Amended Plan not be confirmed until and unless these provisions are amended. The United States Trustee acknowledges the fact that the Toys Delaware Debtors and Geoffrey Debtors may still be negotiating with various constituencies and that certain provisions in the Second Amended Plan may be subject to further revisions or amendments. Moreover, there may be supplemental documents related to the Second Amended Plan filed at a later date or included in the Plan Supplement. To that end, the United States Trustee reserves his rights to raise any other objection resulting from such additional filings, revisions or amendments, at the confirmation hearing.” The U.S. Trustee’s objection in Docket No. 4937 also objects on the grounds noted above.

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