M. Fabrikant files amended plan; creditor asks court to postpone disclosure statement hearing

By Caroline Salls

Pittsburgh, Nov. 1 - M. Fabrikant & Sons, Inc. filed an amended plan of liquidation and related disclosure statement Thursday with the U.S. Bankruptcy Court for the Southern District of New York that allows holders of other secured claims to vote on the plan and details the recovery amount for holders of general unsecured claims.

The holders of other secured claims were not entitled to vote under the company's original plan, but that voting status has been changed.

In addition, the amended plan calls for general unsecured creditors to recover 7.5% to 100% on their claims through a share of trust interests.

In addition, M. Fabrikant said it has paid a portion of its lender claims from sale proceeds, reducing the amount of these claims to $90.6 million from $161.95 million.

The plan distributions are expected to be funded by $826,000 in cash on hand; $1.45 million from affiliates; and $1.3 million in insurance receivables proceeds, according to the amended disclosure statement.

Creditor treatment

Under the plan:

• Holders of $45,000 in administrative expense claims will receive a full cash recovery on the plan effective date;

• Holders of $410,000 in priority tax claims will receive either a full cash recovery on the plan effective date or deferred cash payments plus interest;

• Holders of other priority claims will receive a full cash recovery on the plan effective date;

• Holders of $90.6 million in current lender claims will receive their share of distributions from the Shared Assets Trust;

• Holders of $36 million to $110 million in M. Fabrikant general unsecured claims will receive a share of trust interests; and

• Holders of $650,000 in other secured claims will either receive a full cash recovery, have their rights reinstated, or receive collateral securing their claim. The trustee for the Shared Assets Trust will decide treatment.

As previously reported, judge Stuart Bernstein declined to approve the disclosure statement at a hearing held Tuesday. The judge criticized the document for failing to contain a number of elements necessary for creditors to evaluate the plan, such as the value of the estate, recovery rates and distribution percentages.

New hearing dates

The disclosure statement hearing is scheduled to continue on Nov. 6, and the plan confirmation hearing has been postponed to Dec. 13 from Dec. 6. As a result, the company said it expects to exit bankruptcy by Dec. 31.

The disclosure statement hearing was postponed to Nov. 6 from Nov. 2 at the request of the estate of Philip Hahn, which objected to the original disclosure statement.

The Hahn estate said the hearing should be postponed from Nov. 2 because the amended document was not filed until late Thursday morning.

The amended statement was originally scheduled to be filed by Wednesday, according to the letter from Hahn's estate.

M. Fabrikant, a New York-based manufacturer and distributor of diamonds and gemstone jewelry, filed for Chapter 11 on Nov. 17, 2006. Its case number is 06-12737.

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