GB Holdings shareholder request for examiner to investigate exchange offer

By Caroline Salls

Pittsburgh, Nov. 1 - GB Holdings, Inc. shareholder Robino Stortini Holdings, LLC requested appointment of an examiner or an order directing the company's U.S. Trustee to appoint an official committee of equity interest holders amid controversy surrounding an exchange offer for GB's 11% notes, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of New Jersey.

Robino Stortini said it asked the U.S. Trustee to appoint an equity committee, but the request was declined without reason.

According to the motion, a shareholders' vote to approve an exchange offer for the company's 11% notes due Sept. 29 for shares in Atlantic Coast Entertainment Holdings, Inc. was "a mere formality" because GB's chairman of the board of directors Carl Icahn controlled 77% of GB's outstanding equity and 58% of the notes.

In court documents, GB has said some holders of the 11% notes have alleged the various recent corporate transactions may constitute a fraudulent transfer. Saying there were no objections at the time they were carried out, GB said "it appears that this recent assertion by the 11% noteholders is merely a negotiating strategy."

"The circumstances of the exchange offer and the resulting condition and actions of [GB Holdings] provide ample justification for the need to appoint an independent, unbiased examiner to address issues material to the successful administration of this case and the facilitation of a reorganization that is in the best interests of all creditors and equity holders," the motion said.

Robino Stortini also requested an examiner "cut through the self-dealing and abuse that is prevalent in deals proposed with Mr. Icahn."

"The appointment of an independent examiner will increase the transparency of this proceeding and ensure maximum participation of key constituencies, while on the whole avoiding costly litigation and skepticism about the [company's] dealings with Mr. Icahn and [GB Holdings'] actions immediately preceding the bankruptcy."

As previously reported, GB Holdings filed for Chapter 11 bankruptcy because it did not have the money necessary to repay its $43.7 million 11% notes when they became due.

In a filing with the bankruptcy court, the company said it had not been able to raise the funds to repay those notes by selling its Atlantic Coast Entertainment stock or obtaining new borrowings nor has it been able to refinance them.

A hearing is scheduled for Nov. 28.

GB Holdings has no operating activities. It filed for bankruptcy on Sept. 29 in the U.S. Bankruptcy Court for the District of New Jersey. Its Chapter 11 case number is 05-42736.

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