Hancock Fabrics creditors committee, PBGC oppose disclosure statement

By Caroline Salls

Pittsburgh, April 17 – Hancock Fabrics, Inc.’s official committee of unsecured creditors and the Pension Benefit Guaranty Corp. objected to approval of the disclosure statement for the company’s plan of liquidation, according to Friday filings with the U.S. Bankruptcy Court for the District of Delaware.

“The plan includes certain provisions that are unacceptable to some of the largest creditors in these cases and, unless amended, the plan has a high likelihood of being voted down by the requisite creditors,” the committee said in its objection.

“As such, this court should not approve the motion and the debtors’ estates should not be burdened with the unnecessary cost and delay associated with solicitation of the current drafts of the plan and disclosure statement only to end up back at square one once the plan is rejected.”

Specifically, the committee said the company is proposing to appoint a “responsible person” through the plan to whom the creditor group objects, a debtor-in-possession financing agreement carve-out proposed in the plan should not apply because the DIP lenders were already paid in full and their professionals have been paid amounts in excess of the carve-out.

In addition, the committee said Hancock should not control the composition of a post-effective date committee and should not control the claims process through the responsible person in consultation with the post-effective date committee.

Meanwhile, the PBGC said it objected to approval of the disclosure statement because “it fails to provide adequate information as defined in 11 U.S.C. § 1125(a), with regard to the basis for substantive consolidation of the debtors’ estates and the impact of substantive consolidation on the pension claims.”

Based in Baldwyn, Miss., Hancock Fabrics is a specialty retailer of fabric and related home sewing and decorative accessories. The company filed for bankruptcy on Feb. 2, 2016 under Chapter 11 case number 16-10296.

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