The Relay Company (f/k/a The Rockport Company) – Unsecured Creditors Object to Liquidation Plan, Citing Concerns Over Wind-Down Reserve Amount

December 03, 2018 – The Debtors’ Official Committee of Unsecured Creditors (the “Committee”) filed an objection [Docket No. 621] to the Debtors’ Combined Disclosure Statement and Chapter 11 Plan of Liquidation [Docket No. 554]. 

The objection states, “When the Wind-Down Reserve Amount was agreed to, the Debtors projected that it would be sufficient to not only pay all U.S. Administrative Expense Claims, U.S. Priority Tax Claims, and Liquidating Trust Operating Expenses that were not otherwise satisfied or reserved for as a result of the Sale or some other agreement (collectively, the ‘Required Plan Payments’), but also deliver a meaningful distribution to the holders of General Unsecured Claims against the U.S. Debtors….Even if the Debtors’ filed or to-be-filed objections to certain priority claims are successful and no additional unexpected administrative claims arise, the Wind-Down Reserve Amount will be more than $1,000,000 less than the Required Plan Payments. Accordingly, the Plan does not provide sufficient funds to satisfy, inter alia, UST Fees (which arise as a result of contemplated distributions to the Noteholder Parties), U.S. Priority Tax Claims (mostly sales taxes), or any of the Liquidating Trust Operating Expenses (which would include the costs associated with, among other things, winding down employee plans, filing tax returns, or distributing funds to creditors in accordance with the Plan). Making matters worse, the Committee currently believes, and will be prepared to demonstrate at the confirmation hearing if necessary, that the Debtors’ estimates of the Required Plan Payments are too low, and that the actual reasonable and necessary Liquidating Trust Operating Expenses will be higher than the Debtors’ project. The Plan also fails to fund a reserve for disputed secured, administrative, and priority claims, and there is no cushion if unexpected administrative claims arise. Accordingly, the Debtors simply cannot meet their burden of demonstrating that the Required Plan Payments will be satisfied and that the Plan is feasible.”

The Committee also requested [Docket No. 622] that certain portions of the objection, namely Exhibit 1, be filed under seal. The Committee’s motion states, “In Exhibit 1 to the Objection, the Committee provides, quotes and otherwise references confidential business and commercial information, including projections related to the Wind-Down Reserve Amount and Required Plan Payments. “