Sturgis creditors committee asks court to convert bankruptcy case to Chapter 7 for liquidation

By Caroline Salls

Pittsburgh, Sept. 29 - Sturgis Iron & Metal Co., Inc.'s official committee of unsecured creditors is asking the U.S. Bankruptcy Court for the Western District of Michigan to convert the company's Chapter 11 bankruptcy case to Chapter 7 for liquidation, according to a Saturday court filing.

According to the motion, Sturgis' proposed plan of liquidation "is excessive and unnecessarily expensive."

In addition, the committee said the cost of the proposed plan would fall on the unsecured creditors, but the plan attempts to exclude them from "practically all post-confirmation decision making."

"The debtor's plan does nothing to enhance the recovery of unsecured creditors, and, instead, will likely lead to a diminished recovery favoring multiple layers of professionals," the committee said in the motion.

Despite extensive negotiations, the committee said it does not believe it can reach an agreement on a consensual plan with the company, and Sturgis does not have enough assets to support a "protracted confirmation dispute."

Sturgis, a Sturgis, Mich., scrap metal recycling company, filed for bankruptcy on April 4. Its Chapter 11 case number is 08-02966.

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