GB Holdings' creditors committee files amended plan to include stock sale, dividend claim

By Caroline Salls

Pittsburgh, Sept. 22 - GB Holdings, Inc.'s official committee of unsecured creditors filed its fourth modified plan of liquidation and related disclosure statement Thursday with the U.S. Bankruptcy Court for the District of New Jersey that adds the possibility of an effective date stock sale or a dividend claim.

Under the amended plan, holders of administrative claims, priority tax claims, other priority claims and secured claims will be paid in full in cash or have their secured interests reinstated.

According to the disclosure statement, the holder of the American Real Estate Holdings' secured claim will receive a restructured note in full satisfaction, settlement and release of the claim, provided, however, that if a dividend claim is successful or an effective date sale is consummated, the AREH secured claimholder will be paid in full in cash.

Holders of general unsecured claims will receive cash distributions from either the dividend claim or the effective date sale and/or beneficial interests in a liquidating trust.

The committee said it believes that if it is successful with its dividend claim litigation, the holders of general unsecured claims will be paid in full from the estate.

However, if the dividend claim is unsuccessful, the liquidating trust will market the Atlantic Holdings common stock for sale.

The net effective date sale proceeds, not to exceed $4 million, will be used to fund the liquidating trust reserve, with the remaining amount to be paid to AREH and general unsecured claimholders.

If the common stock is not sold on or before the effective date, the stock will be transferred to the liquidating trust, along with other assets, and the liquidating trust will obtain the exit facility.

If an effective date sale takes place, GB said no exit facility will be needed because proceeds from the sale of the Atlantic Holdings common stock will be available to fund distributions under the plan and an operating reserve of no more than $3 million will be available to finance operations of the liquidating trust.

Holders of equity interests will receive distributions from any proceeds of the dividend claim, effective date sale and/or liquidating trust assets.

Substantially all of the company's assets, including cash on hand, Atlantic Holdings common stock unless sold through an effective date sale, and causes of action will be transferred to the liquidating trust to be managed by a five-member board to maximize the value of and liquidate the assets and prosecute causes of action.

The liquidating trust will be funded either through a liquidating trust reserve in the event of an effective date sale, or through an up to $6 million exit facility if the dividend claim is unsuccessful or the effective date sale does not happen.

According to the plan, the committee will begin litigation against Atlantic Holdings to compel payment of a dividend before the hearing to consider plan confirmation, and the committee said it expects the litigation to conclude before the plan effective date.

If the plan is confirmed, the company will no longer continue as a going concern, and its sole asset following the effective date will be a residual interest in the liquidating trust for the benefit of holders of equity interests.

The company's sole purpose following the effective date will be to hold the residual interest and distribute any amounts distributed to it by the liquidating trust to holders of equity interests after the holders of general unsecured claims, and all the expenses of the liquidating trust, including the exit facility, are paid in full.

The company's current principal tangible asset is 2.88 million shares of Atlantic Coast Entertainment Holdings, Inc. GB Holdings has no operating activities and no income.

Exit facility details

The exit facility will be funded by the company's noteholders and secured by Atlantic Holdings stock.

In order to participate as an exit lender, the noteholder must own at least 1% of the principal amount of notes and must contribute a minimum of $60,000 of the principal of the exit facility.

To the extent that there is a shortfall in participation by the noteholders, the members of the committee, other than indenture trustee Wells Fargo Bank, NA, have agreed to provide the full principal amount of the exit facility.

Maturity on the exit facility will be upon the earlier of termination of the liquidating trust or upon payment in full of the facility.

Interest will be Libor plus 700 basis points.

A hearing on approval of the disclosure statement is scheduled for Oct. 4.

GB Holdings has no operating activities. It filed for bankruptcy on Sept. 29, 2005. Its Chapter 11 case number is 05-42736.

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