Home Interiors lenders seek case conversion, standing to prosecute Highland claims

By Caroline Salls

Pittsburgh, April 15 - Home Interiors & Gifts, Inc.'s non-insider lenders have asked the U.S. Bankruptcy Court for the Northern District of Texas to convert the company's Chapter 11 bankruptcy case to Chapter 7, according to a Wednesday court filing.

The lenders, including MCG Capital Corp., Northwoods Capital IV Ltd., Northwoods Capital VI Ltd., Styx International, Ltd., Atrium CDO, Atrium III CDO, Credit Suisse Syndicated Loan Fund, CSAM Funding II, CSAM Funding III, CSAM Funding IV, First Dominion Funding III and KC CLO I Ltd., also asked the court to grant them standing to file estate causes of action.

According to the motion, Home Interiors' Chapter 11 cases are over, and the only remaining action to be taken is the liquidation and distribution of the estates' remaining assets, which consist mainly of cash and litigation claims.

"Because the debtors are undeniably administratively insolvent and there is no business to rehabilitate, conversion is warranted," the lenders said in the motion.

The lenders said the only parties that will benefit from continuation of the Chapter 11 case are estate professionals and possibly Highland Capital Management, LLP, "who is attempting to obtain a release from the debtors' estates at the expense of the non-insider lenders.

The non-insider lenders said the company's remaining assets, including the proceeds of litigation claims against Highland, must be distributed efficiently and as soon as possible.

In addition, the lenders said they should be granted standing to bring estate cause of action against Highland "to truly benefit these estates and ensure that one of the debtors' estates' most valuable assets is preserved."

The lenders said Home Interiors' official committee of unsecured creditors originally obtained court approval to prosecute the claims, but appears unwilling to proceed.

A hearing is scheduled for May 20.

Home Interiors & Gifts is a Dallas-based integrated manufacturer and distributor of home decorative accessories. The company filed for bankruptcy on April 29, 2008. Its Chapter 11 case number is 08-31961.

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