Goody's settlement approval appealed by U.S. Trustee

By Caroline Salls

Pittsburgh, March 17 - A bankruptcy court order approving Goody's, LLC's settlement with the plan administrator for its prior Chapter 11 bankruptcy case, lenders Prentice Capital Management, LP and PGDYS Lending, LLC and the official committee of unsecured creditors in its current bankruptcy case was appealed Monday by acting Region 3 U.S. trustee Roberta A. DeAngelis.

The appeal was filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, under the settlement, Goody's will be permitted to use cash collateral to provide up to an additional $5 million to satisfy accrued and unpaid administrative obligations under the original plan.

The company will also transfer some of its litigation rights and permitted preference actions in order for the proceeds to also be used to pay the unpaid administrative obligations.

Additionally, the settlement parties have agreed to transfer sole and exclusive authority to pursue causes of action to the official committee of unsecured creditors in the company's current bankruptcy case.

Also under the settlement, the plan administrator for Goody's plan of reorganization in its prior bankruptcy case will be provided up to $250,000 from Goody's current cash collateral, along with the right to use one-third of the net proceeds from the litigation rights and permitted preference actions in furtherance of its fiduciary obligations under the plan.

Under the terms of Goody's plan of reorganization in its prior bankruptcy, reserves were established for administrative creditors. The reserves were initially funded with $2 million, after which the plan required the reorganized Goody's to replenish the reserves if they were insufficient to satisfy all administrative claims in full.

However, the downturn in the national economy caused unexpected financial pressures on the reorganized debtors and the company then determined the best way to maximize the value of the business for its creditors was to conduct an orderly liquidation.

Goody's, a Knoxville, Tenn., family apparel retailer, filed for bankruptcy on Jan. 13. Its Chapter 11 case number is 09-10124.

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