Stein Mart Chapter 11 plan draws objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., March 1 – Stein Mart, Inc.’s Chapter 11 plan of liquidation drew an objection from Region 21 U.S. trustee Nancy J. Gargula, according to a Monday filing with the U.S. Bankruptcy Court for the Middle District of Florida.

Gargula said the plan includes broad, non-consensual releases in favor of parties, including the debtors’ current and former officers, which do not meet the criteria set forth by the 11th circuit.

The plan also provides a liquidating corporate debtor with an impermissible discharge, the U.S. trustee said.

In addition, the plan and accompanying disclosure statement do not demonstrate that the debtors are paying liquidation value to unsecured creditors, Gargula said.

Also, the plan does not provide adequate assurances that the priority claimants will be paid in full despite their classification as “unimpaired,” and the provisions regarding plan modifications are contrary to the bankruptcy code, the U.S. trustee said.

Gargula also argues that the liquidating agent should be appropriately bonded to avoid risk of loss and should provide notice to unsecured creditors regarding costs of the liquidation process so that they can exercise their objection rights if warranted.

A combined hearing on final approval of the disclosure statement and confirmation of the plan is scheduled for March 11.

Stein Mart is a Jacksonville, Fla., operator of retail stores. The company filed Chapter 11 bankruptcy on Aug. 12, 2020 under case number 20-02387.

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