GenOn U.S. Trustee raises objections to plan classification, releases

By Caroline Salls

Pittsburgh, Nov. 6 – The U.S. Trustee overseeing GenOn Energy, Inc.’s Chapter 11 case objected to confirmation of the company’s proposed plan of reorganization, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of Texas.

Region 7 U.S. Trustee Judy A. Robbins said in her objection that the plan improperly classifies general unsecured creditors as unimpaired.

Because the plan provides that the general unsecured creditors are releasing claims against various third parties, Robbins said they are “losing their rights under the plan.”

“Because any change in their rights, no matter how slight, results in impairment, these creditors are impaired, and thus have a right to vote on the plan,” the U.S. Trustee said.

In addition, even though creditors are entitled to interest on their claims if they are unimpaired, Robbins said the plan is ambiguous about whether GenOn will pay general unsecured creditors interest.

Robbins said the plan also improperly provides broad third-party releases, exculpations and injunctions, and, while they attempt to classify these provisions as consensual, “the debtors place so many hurdles to opting out upon creditors, that those releases cannot be considered consensual.”

Specifically, the U.S. Trustee said noteholders are not allowed to vote and opt out. Instead, if they want to opt out of the releases, they are required to give up their statutory right to vote, and general unsecured creditors are not even provided the choice to opt in or opt out unless they hire a lawyer, file an objection and have the attorney appear in court to prosecute the objection.

“If they do not follow all of these steps, the debtors assert that they have consented to the releases,” Robbins said. “This is not consent.”

GenOn, a Princeton, N.J.-based power producer, filed bankruptcy on June 14. The Chapter 11 case number is 17-33695.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.