Gibson Brands creditors committee balks at proposed plan recoveries

By Caroline Salls

Pittsburgh, July 19 – Gibson Brands, Inc.’s official committee of unsecured creditors objected Thursday to the company’s motion for approval of the disclosure statement for its Chapter 11 plan, calling the plan “unconfirmable,” according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

While proposing a 0.2% recovery to general unsecured creditors and a minimal recovery to holders of convenience claims, the committee said the plan delivers a substantial recovery to equityholders and supporting noteholders.

The committee said the plan violates the absolute priority rule of the Bankruptcy Code by giving $5.45 million in cash to controlling shareholders and senior Gibson Brands officers and warrants and a share of profits to other officers.

In addition, the creditor group claims the plan illegally provides broad releases in favor of the supporting principals.

“The plan appears to be the culmination of the efforts of the supporting noteholders – set into motion pre-petition with the execution of a restructuring support agreement – to buy the support of the supporting principals by providing them otherwise unavailable recoveries in the form of large sums of money and additional equity consideration that vastly exceeds recoveries to general unsecured creditors,” the committee said.

Gibson Brands is a Nashville-based maker of musical instruments and consumer and professional audio. The company filed bankruptcy on May 1 under Chapter 11 case number 18-11025.

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