SiO2 Medical’s Chapter 11 plan draws objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., July 13 – SiO2 Medical Products, Inc.’s Chapter 11 plan drew an objection from Regions 3 and 9 U.S. trustee Andrew R. Vara, according to documents filed Thursday with the U.S. Bankruptcy Court for the District of Delaware.

Vara said the plan shouldn’t be confirmed because it imposes non-consensual third-party releases on several non-debtor parties, and a related-parties clause expands the universe of those who will be stripped of their claims against non-debtors.

The U.S. trustee said most of the “related parties” and “affiliates,” as defined in the plan, did not receive a ballot with an opt-out form or a notice of confirmation because they are not creditors or equity holders of the debtors.

They include all current and former employees of all creditors who are defined as “releasing parties,” and all current and former employees of all affiliates of all creditors who are releasing parties.

“The opt-out mechanism in these cases provides nothing but an illusion of consent, and there is no basis in these cases for the approval of such non-consensual third-party releases under the bankruptcy code,” Vara said in the objection.

Vara said he also objects to the plan because there is a provision that treats the entire plan and all distributions made through it as a settlement of all claims and interests held by the debtors’ creditors and equity holders.

The confirmation hearing is scheduled for July 18.

The Auburn, Ala.-based company creates and manufactures engineered primary packaging container components for the pharmaceutical and biotechnology industry. The company filed bankruptcy on March 29 under Chapter 11 case number 23-10366.

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