Manchester disclosure approval expected upon addition of language changes; confirmation hearing June 12

By Jennifer Lanning Drey

Portland, Ore., April 30 - Manchester Inc.'s disclosure statement for its first amended plan of reorganization is expected to be approved upon the court's receipt of a version with additional language changes agreed to by the company during a Wednesday hearing at the U.S. Bankruptcy Court for the Northern District of Texas, according to a source familiar with the case.

The confirmation hearing is scheduled for June 12.

Manchester filed an amended plan of reorganization Tuesday that no longer includes a recovery for holders of $1.46 million in administrative convenience claims of $10,000 or less.

In the original plan holders of the claims were slated to receive 100% in cash.

The new plan also increased the estimated amount of general unsecured claims to $23.38 million from $21.93 million and increased the estimated recovery for the class to 12.6% from 5.4%

As previously reported, Manchester's plan of reorganization is based on terms proposed by Palm Beach Multi-Strategy Fund LP.

The reorganization depends on the deposit of $3 million, which will be used to satisfy the claims of unsecured creditors and to fund the expenses that will be incurred by the company during the approval process and provision of DIP financing of up to $10 million to fund Manchester while it is in bankruptcy.

As part of the proposal, claims asserted by Manchester against Palm Beach in cases pending in the U.S. Bankruptcy Court and in the District Court, 101st Judicial District, Dallas County and the claims asserted by the fund against the current officers and directors of the company will be resolved.

Creditor treatment

Treatment of creditors under the plan will include:

• Holders of $200,000 in priority tax claims and $3.74 million in priority non-tax claims will recover 100% in cash;

• Holders of $423,000 in M&I secured bank claims will have their claims reinstated;

• Holders of senior lender secured claims will receive 100% of the new common stock in the reorganized company for a 100% recovery;

• Holders of $23.38 million in general unsecured claims will recover 12.6% in plan cash and leftover cash after priority and administrative claims are paid in full, and these creditors will receive litigation trust funds after all expenses are paid in full and the company's senior lender is reimbursed for leftover cash, seed cash and $2.5 million in plan cash;

• Holders of senior lender unsecured claims will receive a share of any litigation trust funds remaining after payment of litigation trustee fees and expenses, senior lender reimbursement and payment to general unsecured creditors. As a result, the company estimates that these creditors will not receive any distribution under the plan;

• Holders of $2.84 million in Lancelot settlement claims will be treated either as secured claims or general unsecured claims, which will be decided by the court;

• Holders of parent common stock interests will receive a share of liquidation trust funds after payment of trust fees and expenses, senior lender reimbursement, payment in full to general unsecured and unsecured lender claims and an additional $500,000 reimbursement of plan cash; and

• Holders of subsidiary equity interests will retain their interests.

Manchester, a Dallas-based auto dealership that sells and finances used cars to buyers with limited credit histories or past credit problems, filed for bankruptcy on Feb. 7. Its Chapter 11 case number is 08-30703.

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