April 25, 2019 – The Debtors' Official Committee of Unsecured Creditors (the “Committee”) filed a motion to requesting conversion of the Debtors' Chapter 11 cases to cases under Chapter 7 [Docket No. 1152], arguing that the ill-fated, ill-managed Debtors are now insolvent and that the "bleeding should come to an end." The Committee aslo filed an objection to the Debtors' requested exclusivity extension [Docket No. 1155] which we cover separately.
The present motion states, “As the Committee stated to the Court at its first hearing, the Committee’s overarching goal in these cases was to preserve ShopKo as a going concern with the largest possible footprint of stores because that would provide the greatest value to the unsecured creditors: it would save thousands of jobs for employees, provide a tenant for dozens of landlords, and keep a customer for hundreds of vendors. Unfortunately, due to disappointing pharmacy sales, a failed sale process, and questionable management decisions, these cases are now administratively insolvent by tens of millions of dollars, and the Committee is compelled to move to convert these cases to cases under Chapter 7.
The Committee does not take conversion to Chapter 7 lightly. However, conversion is necessary to minimize the amount of additional administrative expenses accruing and enable a chapter 7 trustee to pursue insider claims unburdened by the Debtors’ continued efforts to bury those claims in chapter 11. Based upon the Committee’s analysis, the Debtors will be administratively insolvent in the best case by $9.6 million using the Debtors’ assumptions, but more likely in the range of $42.0 million or higher after the closing of the sale of the Optical Business and the completion of the going out of business sales. More than 60 administrative creditors have objected to the Debtors’ plan of liquidation, which does not provide for payment in full of administrative claims as required by the Bankruptcy Code. At the same time, significant chapter 11 administrative claims, primarily professional fees, continue to accrue. Under these circumstances, there is no reason these liquidating cases should remain in chapter 11 any longer. The bleeding should come to an end.
“The Debtors may be able to explain away some of the unfortunate events and actions that have occurred during their Chapter 11 cases, but regardless of the answer, it is clear that the Debtors cannot confirm a plan and these cases should be converted to cases under Chapter 7 to stop the continuing administrative burn and preserve value for the benefit of all creditors. An independent Chapter 7 trustee can, and should be appointed to, complete the wind down of these estates and pursue estate causes of action to benefit all creditors.”
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The post Specialty Retail Shops Holding Corp – Creditors Feel the Administrative Burn and Seek Conversion to Chapter 7, Arguing that “Bleeding Should Come to an End” appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.