M. Fabrikant approval for liquidation plan expected upon judge's review of language changes

By Jennifer Lanning Drey

Portland, Ore., April 29 - M. Fabrikant & Sons Inc.'s plan of liquidation failed to gain court approval at a Tuesday hearing but is expected to be confirmed upon bankruptcy judge Stuart Bernstein's receipt of language changes made to the proposed confirmation order, according to a source familiar with the case.

If all involved parties agree to the language changes included in the proposed confirmation order, judge Bernstein of the U.S. Bankruptcy Court for the Southern District of New York can sign off on the order without scheduling a further court hearing.

As previously reported, the plan provides for the establishment of two liquidating trusts. The beneficiaries of the first trust are current lenders, and proceeds from the second trust will be distributed to creditors.

Creditor treatment

Under the liquidation plan, creditor treatment is as follows:

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

• Holders of 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 $161.95 million in current lender claims will receive their share of distributions from the Shared Assets Trust;

• Holders of $70.08 million in general unsecured claims against the company will receive a share of trust interests; and

• Holders of other secured claims will 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.

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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