November 16, 2018 – The U.S. Trustee filed an objection [Docket No. 785] to the Debtors’ First Amended Joint Chapter 11 Plan. The U.S. Trustee asserts, “Significant issues have been raised by numerous of the Debtors’ creditors in their objections to confirmation of the Plan. These issues include, but are not limited to, feasibility of the Plan, valuation, disparate treatment of different groups of general unsecured creditors, and improper classification of a $33 million dollar sub-debt claim in the class of general unsecured creditors. The U.S. Trustee leaves the Debtors to their burden on these issues and all others that must be addressed before the Plan can be confirmed, and reserves the right to question witnesses and raise arguments with respect to the same at the hearing. By this Objection, the U.S. Trustee also addresses a number of additional issues that arise out of the Plan’s provisions. The first is that the Plan provides for deemed substantive consolidation ‘for plan purposes only’ of all five Debtors, who will continue to maintain their separate corporate identities for all other purposes. The Debtors propose that, after the Effective Date, the cases of all of the Debtors other than that of NuLnk, Inc. be closed, and that the administration of all five debtors be conducted thereafter through NuLnk. The intent appears to be to have NuLnk attempt to file and prosecute objections to claims asserted against the other Debtors, and prosecute causes of action held by the other Debtors. Whether, absent true substantive consolidation, the administration of all the Debtors’ cases can be conducted through NuLnk after the other Debtors’ cases are closed will have to be addressed by the Debtors when they move to close those cases. 1 It appears, however, that the purpose of this substantive consolidation ‘for plan purposes only,’ and the anticipated closure of the cases of four of the Debtors at a time when critical tasks will remain to be done, is to avoid payment of statutory fees mandated under 28 U.S.C….This is evidenced by the fact that the Debtor whose case is to remain open, NuLnk, is a dormant entity that has had almost no disbursements during the course of the cases, whereas each of the other four Debtors have had disbursements that give rise to more significant Statutory Fee obligations. Substantive consolidation for plan purposes only, as the Debtors seek here, cannot be used as a vehicle to avoid Statutory Fee obligations.”
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