Nine West Holdings – Ad Hoc Committee of Unsecured Noteholders Objects to Disclosure Statement, Cites “Grossly Inadequate Consideration” of Sycamore Settlement

November 9, 2018 – The Debtors’ Ad Hoc Group of Unsecured Noteholders filed an objection [Docket No. 835] to Nine West Holdings’ (“NWHI”) Disclosure Statement [Docket No. 783]. The Noteholders assert, “The Plan is centred upon a purported settlement of Debtor NWHI’s valuable claims against its equity holders for grossly inadequate consideration. The Ad Hoc Group, the UCC and other representatives of almost $900 million of unsecured claims against NWHI vigorously oppose this Equity Holder Settlement and the Plan. No NWHI-only creditors support the Plan. The only creditors of NWHI who support the Plan also have claims against NWHI’s subsidiaries and either are not impacted by the Equity Holder Settlement (in the case of the ABL Lenders and the Secured Term Loan Lenders) or stand to recover more than 100% of their claims under the Plan (in the case of the Unsecured Term Loan Lenders).  A second ‘settlement’ incorporated in the Plan, described in the Disclosure Statement as the ‘Intercreditor Plan Settlement’, is the vehicle through which the Debtors seek to procure the Unsecured Term Loan Lenders’ support for the Equity Holder Settlement. The Intercreditor Plan Settlement is not a settlement between creditors as the term would suggest. Rather, it is a one-sided resolution of various intercompany claims and inter-Debtor valueallocation disputes that unfairly siphons value from NWHI to its subsidiaries. The Unsecured Term Loan Lenders—as the only unsecured creditors who have claims against both NWHI and its subsidiaries—are the sole beneficiaries of the Intercreditor Plan Settlement. Unsurprisingly, the Unsecured Term Loan Lenders are also the only affected creditors who support the Intercreditor Plan Settlement. 

The Debtors’ overzealous efforts to obtain the Unsecured Term Loan Lenders’ support for the Equity Holder Settlement has resulted in the proposal of a Plan that is patently unconfirmable as it relates to NWHI. The Plan seeks to bully certain NWHI unsecured creditors by deducting all confirmation-related expenses from such creditors’ already paltry recoveries. Of course, the Plan carves out the Unsecured Term Loan Lenders from this indefensible provision, so their inflated recoveries will not be diminished by confirmation-related expenses. The Debtors have not and cannot identify any legal basis for charging NWHI—let alone a disfavored subset of NWHI’s unsecured creditors—for all expenses associated with confirmation of a Plan that principally benefits NWHI’s subsidiaries and those subsidiaries’ creditors to the detriment of NWHI…. The Plan, as it relates to NWHI, further violates section 1129(b) of the Bankruptcy Code by unfairly discriminating against NWHI’s unsecured creditors other than the Unsecured Term Loan Lenders in multiple respects. In addition to burdening only a subset of NWHI’s unsecured creditors with the confirmation-related expenses, the Plan also provides the Unsecured Term Loan Lenders with 92.5% of the non-cash consideration from the Equity Holders Settlement. This favored treatment for the Unsecured Term Loan Lenders may have been part of the price for getting their support for the Plan, but it cannot be justified under the Bankruptcy Code.”