ShoreBank creditors' committee reconstitution request denied by court

By Caroline Salls

Pittsburgh, March 12 - Three ShoreBank Corp. general unsecured creditors' motion to reconstitute or disband the company's official committee of unsecured creditors or to appoint an official directors and officers committee was denied Monday by the U.S. Bankruptcy Court for the Northern District of Illinois.

The motion was filed by Jamil Moore, Ron Gryzwinski and Mary Houghton, who collectively hold about $3 million in claims against ShoreBank.

In their motion, the creditors said the current two-member creditors committee is inadequate to represent their interests.

Each of the three said they informed the U.S. Trustee of an interest to serve on the official committee of unsecured creditors, but none of them were selected.

The three claimants said the committee is "unsuitable for these cases because it is dominated by the TruPS - a class of creditors that are expressly subordinated to the claims of other unsecured creditors and that will only receive a distribution if JPMorgan Chase Bank, NA receives full payment of its $12 million claim."

The TruPS holders are "incentivized to direct the committee to pursue high-risk strategies that run the risk of depleting the estates of precious resources because it is the only way they could possibly receive any recovery on their claims in excess of $20 million," the motion said.

In Monday's ruling, judge A. Benjamin Goldgar said the committee's membership does not need to be changed to ensure adequate representation of creditors.

Goldgar said the claim that the TruPS creditors will breach their fiduciary duties as committee members and act contrary to the interests of the creditors they represent "is currently no more than vague and unsupported speculation."

Chicago-based ShoreBank is a bank holding company. The company filed for bankruptcy on Jan. 9 under Chapter 11 case number 12-00581.

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