KB Toys creditors committee withdraws case conversion motion

By Caroline Salls

Pittsburgh, Dec. 31 - KB Toys, Inc.'s official committee of unsecured creditors has withdrawn its motion for conversion of the company's bankruptcy case to Chapter 7, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the committee objected to the company's going-out-of-business sales on Dec. 18 and asked the court to convert KB's bankruptcy case to Chapter 7 for liquidation.

"Without the common charade of establishing a sale process to search for a non-existent going concern bidder, the debtors have unequivocally declared at the outset that the sole purpose of these cases is to liquidate all remaining assets of the debtors - primarily the collateral of the prepetition lenders - and cease operations," the committee said in its filing.

The committee said the company is asking the court to "rubber stamp" a process that was launched before the bankruptcy filing, resulting in the immediate liquidation of substantially all of KB Toys' assets for the exclusive benefit of the pre-bankruptcy lenders, including the company's majority shareholder Prentice Capital Management.

The committee said this strategy would leave no distribution for unsecured creditors and leave the company administratively insolvent.

KB Toys, a Pittsfield, Mass., mall-based toy retailer, filed for bankruptcy on Dec. 11. Its Chapter 11 case number is 08-13269.

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