hhgregg case dismissal motion draws objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., July 22 – hhgregg, Inc.’s motion to dismiss its Chapter 11 bankruptcy case drew an objection Thursday from Region 10 U.S. trustee Nancy J. Gargula, according to a filing with the U.S. Bankruptcy Court for the Southern District of Indiana.

The U.S. trustee said the motion to dismiss should not be granted because it proposes to make distributions to the administrative expense claimants, without their affirmative consent, in an amount less than payment in full in the event the bankruptcy cases are administratively insolvent.

“The court should delay its ruling on the motion to dismiss until the administrative claims bar date passes and any objections to administrative expense claims have been resolved,” the U.S. trustee said.

“In the event that the debtors are able to obtain affirmative consents from all administrative expense claimants this objection will be moot.”

Alternatively, if the debtors can’t obtain the necessary consents, the court should convert the cases to Chapter 7 so that the remaining assets may be distributed as required by the bankruptcy code, Gargula said.

As previously reported, the official committee of unsecured creditors had expressed its support for the dismissal.

“Taking into account that there are insufficient funds to satisfy the estates’ priority claims – much less general unsecured claims – even if the liquidation of the remaining assets yields recoveries at the higher end of estimates, the committee has determined that the relief requested in the motion to dismiss merits this court’s approval and provides closure to all stakeholders without unreasonable delay,” the committee said.

In mid-January, the debtors were in the process of analyzing and engaging with stakeholders on the best path forward to winding down their cases without unreasonable delay and cost.

“The debtors now believe that even if the ongoing liquidation of remaining assets yields recoveries at the high end of estimates, the estates are not expected to satisfy projected priority claims in full, much less permit distributions to general unsecured creditors,” the company said in its motion.

“And of the various procedural vehicles to accomplish this task, the debtors are unable to justify the significant additional administrative burden that would undoubtedly accompany the prosecution of an unconfirmable Chapter 11 plan or the inefficiency of conversion of these cases to Chapter 7.

“This leaves a structured dismissal of the Chapter 11 cases as the best option to get the most amount of money into the hands of creditors in 2021.”

The debtors are seeking authority to implement a two-step process intended to culminate with the entry of the annexed dismissal order in the second half of 2021.

First, the wind-down procedures include a phased claims reconciliation process for administrative claims and, if warranted based on recoveries, for priority claims, followed by pro rata distributions to holders of allowed claims in order of statutory priority.

Concurrently with claims reconciliation, the debtors will work to liquidate all remaining assets primarily in the form of three adversary proceedings pending before the court.

To fund the administrative costs of proposed wind down, including payment of professional fees incurred on and after Jan. 1, the debtors are seeking approval of a wind-down budget.

Second, the debtors will file a final report once claims reconciliation is complete and all remaining assets have been liquidated or otherwise resolved. And in conjunction with the final report, the debtors’ cases will be dismissed and the debtors will be dissolved.

“The debtors believe that the merits of dismissal here, both in terms of efficiency and lack of prejudice to creditors, render the plan and Chapter 7 conversion alternatives pointless as well as burdensome false options,” the company said.

hhgregg is an Indianapolis-based specialty retailer of consumer electronics and home appliances. The company filed for bankruptcy on March 6, 2017 under Chapter 11 case number 17-01302.

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