KB Toys trustee objects to plan of reorganization

By Caroline Salls

Pittsburgh, Aug. 11 - KB Toys, Inc.'s U.S. Trustee objected to the company's proposed plan of reorganization, according to a Thursday filing with the U.S. Bankruptcy Court for the District of Delaware.

Trustee Kelly Beaudin Stapleton said the plan provides for release from claims and other causes of action to an "impermissibly broad class of persons," including all officers, directors, employees, attorneys, financial advisers, accountants, investment bankers, agents and representatives of the company from Dec. 8, 2000 onward.

According to the objection, although the plan says the release is being granted in consideration of the parties' efforts during the Chapter 11 process, not all of the releasees served the company during this time.

"The group of proposed releasees should be narrowed considerably to exclude persons who did not serve on or after Jan. 14, 2004," the trustee said in the objection.

Stapleton also said the plan grants releases to members of the company's pre-bankruptcy informal committee that are far broader than those provided to members of its official committee of unsecured creditors.

A hearing on confirmation of the plan is scheduled for Aug. 18.

KB Toys, a Pittsfield, Mass., toy retailer, filed for Chapter 11 on Jan. 14, 2004. The company expects to emerge from bankruptcy before the 2005 holiday season.

The company's Chapter 11 case number is 04-10120.

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