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KB Toys receives extension to file plan of reorganization, creditors get investigation approval
By Ellen Chang
Houston, March 10 - KB Toys, Inc. received an extension to its exclusive right to file a plan of reorganization to May 15, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.
The company also received an extension to July 15 for acceptance of the plan to be solicited.
The Pittsfield, Mass., toy retailer asked for its exclusive period to file a plan to be prolonged from Feb. 15 and its exclusive period to solicit votes to be extended from April 16.
In addition, the company's official committee of unsecured creditors were granted court permission to investigate and potentially take legal action over a $121 million payout to shareholders in April 2002.
Asking for authorization, the committee claimed that that transaction used up nearly all the company's cash on hand - even as those involved knew the economy generally was heading deeper into recession and the toy industry and specifically KB Toys were in a downward trend.
"It appears the transaction was effectuated during the zone of insolvency or when the debtors were insolvent, or, alternatively, the transaction rendered the debtors insolvent," the creditors said in their original motion filed with the bankruptcy court.
The committee now has authorization to investigate and take legal action, including fraudulent conveyance actions, against the current chief executive officer, the current chief financial officer and Bain Capital, Inc. and related investment funds.
Bain acquired KB Toys in December 2000 with a $17.5 million equity investment.
KB Toys, a Pittsfield, Mass., toy retailer, filed for Chapter 11 on Jan. 14, 2004. Its Chapter 11 case number is 04-10120.
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