Court Enters Order Granting Objections to Debtor’s Disclosure Statement, Setting Mediation

On March 7, 2013, the Court entered an Order granting the various Objections to the Debtor’s Disclosure Statement and, upon consent of Counsel, denying the Debtor’s Chapter 11 Plan.  The Court further extended the exclusivity period for the Debtor to propose and solicit a plan of reorganization until April 22, 2013, in order to allow the Debtor and RBS to work toward RBS’s crucial assent to any plan by way of mediation.  The Court’s directive with respect to mediation is subject to a key condition, in that the Debtor shall provide RBS with an audited individual net worth statement for the Debtor’s principal, Richard Osborne, on or before March 21, 2013.  Concurrently therewith, RBS shall also provide the Debtor with a detailed statement of its claims.

In the event that such statements are prepared and exchanged, the Debtor and RBS shall have commenced and concluded a mediation on or before April 8, 2013.  Any unexcused failure by Osborne to strictly comply with his obligations under the Order shall be deemed as “bad faith” and will lead to an immediate termination of the exclusivity period.

Objections Filed to Debtor’s Disclosure Statement

On or before February 28, 2013, several parties filed Objections to the Debtor's Disclosure Statement supporting its Plan of Reorganization.  The Committee filed an Objection, arguing in part that administrative claims are underestimated, the Debtor’s proposed treatment of creditors is not feasible, and the Debtor’s assets are severely depleted.  RBS filed an Objection, arguing in part that its liens are being stripped down, the Debtor’s equity holders are retaining their interests without any infusion of cash, and the Plan includes improper third-party releases.  The United States Trustee also filed an Objection, arguing in part that the financial information set forth in the Debtor’s Disclosure Statement is not adequate or feasible. 

Additionally, RBS filed a Motion for Approval of Administrative Claim seeking a superpriority administrative claim on account of its interest in the Debtor’s collateral allegedly not having been adequately protected.  The Debtor also filed a Motion to Extend Exclusive Solicitation Period with respect to the exclusive period during which it may solicit votes for its Plan, citing scheduling issues that cause the need for such an extension.

Finally, updating a previous post, the Committee's Motion for Authority to Prosecute Fraudulent Transfers was continued generally to track the Debtor's Plan confirmation process.  A hearing remains scheduled on the Debtor’s Disclosure Statement for Thursday, March 7, 2013 at 10am.

Court Denies Debtor’s Emergency Motion to Enforce the Automatic Stay against Receiver

Updating a previous post, the Court on February 27, 2013, entered an Order denying the Debtor’s Emergency Motion to Enforce the Automatic Stay (“Motion”) with respect to the efforts of the Receiver, Mark E. Dottore (“Receiver”), to collect its fees from RBS in the Northern District of Ohio.  The Court, in deciding the Motion on its merits, found that the Debtor will not be negatively affected in any significant way by the Receiver’s efforts.

An evidentiary hearing on the Receiver’s Application for Compensation filed in the Bankruptcy Court in Erie has been scheduled for Monday, May 20, 2013 at 9:30am, with a Pre-Trial Conference scheduled for Tuesday, April 30, 2013 at 9:30am.