Erickson creditors ask court to hear evidence of plan allocation value

By Caroline Salls

Pittsburgh, Jan. 13 - Erickson Retirement Communities, LLC's official committee of unsecured creditors has asked the U.S. Bankruptcy Court for the Northern District of Texas to schedule an evidentiary hearing to determine the proper allocation of value for the company's plan of reorganization, according to a Wednesday court filing.

The committee said a dispute surrounding the proper allocation of value among Erickson's debtors and their assets must be resolved for the proposed plan to be confirmed.

The main issue of the dispute is the allocation of value to new 10-year management agreements to be executed by Erickson's not-for-profit affiliates, the motion said.

The committee said "the undisputed primary driver" of Redwood Capital Investment's $365 million cash bid for the company's assets is the right to the 10-year management agreements, an asset that was created after Erickson filed for bankruptcy and not subject to pre-bankruptcy liens.

"Such allocation either needs to be resolved by agreement or court order, so that it may be incorporated into the debtor's plan by amendment made prior to solicitation," the committee said in the motion.

In addition, the committee said $627 million in potential avoidance actions are being conveyed to Redwood under the sale with no allocated value.

As a result, the committee said the proposed allocations must be subject to an evidentiary hearing before any decision can be made on approval of Erickson's disclosure statement.

"An evidentiary hearing will ensure a legal and equitable allocation of value and avoid wasting this court's time and the estate's limited resources with a disclosure statement hearing that cannot result in any success or progress," the committee said.

Baltimore-based Erickson Retirement develops full-service retirement communities. The company filed for bankruptcy on Oct. 19. Its Chapter 11 case number is 09-37010.

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