The Amended Disclosure Statement fails to adequately address how confirmation of the Amended Plan will put the Debtor in a position to succeed and repay its creditors. It contains materially false information and nowhere near ‘adequate information’ regarding a variety of issues that are of material importance to creditors and other parties in interest when considering approval or rejection of the Amended Plan, and it glosses over and fails to explain key assumptions that make the Amended Plan unworkable. As a threshold matter, the Amended Plan is un-confirmable as a matter of law in at least three respects.
First, the Amended Plan is not feasible. The Amended Plan provides for an Effective Date no earlier than March 1, 2019, but the Debtor continues to lose money and, more importantly, lacks a commitment for financing beyond October 31, 2018 (with any potential future extension for no more than six months at a time).
Further, although the Amended Disclosure Statement does not disclose what cash and other liquidity will be available between the date hereof and the earliest projected Effective Date, the little information that is provided demonstrates that the Debtor will not have sufficient cash both on the Effective Date (to pay Medley $572,764.28 in accrued and unpaid prepetition interest owing to Medley (plus other accrued and unpaid interest and expenses owing to Medley)) and on July 1, 2020 (the ‘Medley Loan Maturity Date’) to pay Medley in full. The Amended Plan also contains provisions that impair Medley even though the Debtor purports to treat Medley as ‘unimpaired.’ Although the Debtor chose to voluntarily dismiss the Adversary Proceeding (rather than face a motion to dismiss), such dismissal is without prejudice and the Debtor is proposing to transfer the right to prosecute the false ‘claims’ against Medley and Deloitte to the Creditors’ Committee and leave the Creditors’ Committee in place until such claims are resolved….The Amended Disclosure Statement should be denied. There is no certainty as to the Effective Date of the Amended Plan.
Moreover, a multitude of issues must be resolved before the Debtor can provide adequate disclosure, including, for example, (a) the Debtor’s lack of any committed financing beyond October 31, 2018; (b) the Debtor’s improper treatment of the Insider (e.g., the Disguised Sale and Insider Release); (c) the Debtor’s alleged claims against Medley (despite facially saying that Medley is unimpaired); (d) the Debtor’s alleged ability to sell the Medley Collateral and use the proceeds to pay junior general unsecured creditors (effectively prioritizing lower-tier creditors and rendering Medley unsecured); and (e) clarifying that the Debtor’s specious interest in approximately $4 million in settlement proceeds in connection with certain commercial tort claims against Deloitte and Managease, Inc. (the ‘MVF Proceeds’) is just that. Accordingly, approval of the Amended Disclosure Statement should be denied.”
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