Linens 'n Things proposes changes to confirmed liquidation plan

By Caroline Salls

Pittsburgh, Jan. 21 - Linens Holding Co. requested court approval to make changes to its confirmed plan of liquidation, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

According to the motion, the company originally expected to pay administrative and priority claims through cash from a senior secured noteholder contribution and avoidance recoveries.

However, Linens said the process of collecting preferences has been slower than expected, and it does not expect to generate enough proceeds to satisfy these claims "in the foreseeable future."

Given the delays in the plan effective date and the fact that the company's senior noteholders have been forced to continue funding Linens' wind-down and professional fees from cash collateral, the company said the senior noteholders have agreed to the proposed plan changes.

In addition, implementation of the changes will be a condition of any future plan effective date extension.

The changes include:

• On the plan effective date, all avoidance actions and avoidance recoveries already received will be transferred to a liquidating trust, and the trustee will pursue the actions;

• The trustee will issue several series of trust interests. Holders of tier 1 interests will be entitled to receive up to $3.75 million of avoidance recoveries; holders of tier 2 interests will be entitled to receive $697,552 of avoidance recoveries and $700,000 in reimbursement expenses; holders of tier 3 interests will be entitled to receive all net proceeds of avoidance recoveries, which will be divided between the senior noteholders and holders of administrative and priority claims, after tier 1 and tier 2 interests are paid in full; and holders of tier 4 interests will receive all remaining avoidance recovery proceeds;

• Holders of senior notes claims will receive a share of $3 million in cash to be distributed on the effective date, all tier 1 and tier 2 interests and 50% of tier 3 and tier 4 interests;

• Holders of general unsecured claims will receive 50% of tier 4 interests; and

• Holders of administrative and priority claims will receive a share of the $3 million effective date distribution and 50% of tier 3 interests.

The company is also asking the court to deem the amended plan as accepted by creditors and equity holders who voted to accept the original plan.

Under the original plan, which was confirmed in June 2009:

• Holders of administrative claims, priority tax claims and other priority claims were scheduled to be paid in full in cash;

• Holders of senior note claims would have been paid in full through a share of the senior noteholder distribution; and

• Holders of unsecured claims would have been paid in full from the unsecured creditor liquidating trust.

A hearing is scheduled for Feb. 19.

Linens 'n Things, a Clifton, N.J., home furnishings specialty retailer, filed for bankruptcy on May 2, 2008. Its Chapter 11 case number is 08-10832.

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