SmileDirectClub’s Chapter 11 case to be converted to Chapter 7

By Sarah Lizee

Olympia, Wash., Jan. 25 – SmileDirectClub Inc.’s Chapter 11 bankruptcy case will be converted to Chapter 7 on Friday, according to a minute entry filed Wednesday with the U.S. Bankruptcy Court for the Southern District of Texas.

As previously reported, after being unable to reach a going-concern sale deal, the company had hoped to sell its assets via credit bid to its lenders and then wind down. The debtor had filed sale and case dismissal motions to facilitate the process.

The motions drew an objection from Region 7 U.S. trustee Kevin M. Epstein, who said the credit bid sale to debtor-in-possession lenders wouldn’t provide enough consideration to pay administrative claims in full.

“The asset sale and structured dismissal are each codependent and interconnected as a part of a settlement construct that amounts to an impermissible sub rosa plan circumventing the bankruptcy code’s procedural safeguards,” Epstein said in the objection.

“The so called ‘global settlement’ sought by the dismissal motion is not global but merely an agreement among debtors, the official committee of unsecured creditors and the DIP lenders that attempts to avoid the bankruptcy code’s protections and requirements and otherwise provides no benefit to holders of unsecured claims.”

The U.S. trustee had suggested the court deny the motions and instead dismiss without condition or convert the cases to Chapter 7.

SmileDirectClub is a Nashville-based oral care company. It filed bankruptcy on Sept. 29 under Chapter 11 case number 23-90786.

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