Gymboree U.S. trustee opposes disclosure statement’s ‘broad’ releases

By Caroline Salls

Pittsburgh, July 17 – The U.S. trustee overseeing Gymboree Corp.’s Chapter 11 case objected to the disclosure statement for the company’s plan of reorganization, basing the objection on “broad third-party release and exculpation provisions,” according to a July 17 filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.

Region 4 U.S. trustee Judy Robbins said in the objection that the Fourth Circuit Court of Appeals previously ruled that the release provisions in question “should be granted cautiously and infrequently.”

“While the disclosure statement recites those provisions verbatim, it fails to disclose or describe any of the factual circumstances rendering those provisions appropriate or even to disclose that such provisions are disfavored and not generally appropriate,” Robbins said in the objection.

In addition, the U.S. trustee said Gymboree’s disclosure statement incorrectly describes the release provisions as consensual when, in fact, only one out of the eight classes has any say in whether it agrees to the releases and four of the eight classes are deemed to consent to the releases by virtue of their unimpaired status.

“Those failures render the disclosure statement subject to disapproval,” according to the objection.

Gymboree, a children’s apparel specialty retailer based in San Francisco, filed for bankruptcy on June 11. The Chapter 11 case number is 17-32986.

© 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.