Filene's Basement, Syms plan confirmation ruling delayed by objections

By Jim Witters

Wilmington, Del., Aug. 29 - Filene's Basement, LLC and Syms Corp.'s confirmation hearing for its modified second amended plan of reorganization was slowed Aug. 29, as an informal group of unsecured creditors pressed their objection to the plan's provision for post-petition interest on their claims.

Jeffrey Waxman, representing those creditors, argued during a hearing in the U.S. Bankruptcy Court for the District of Delaware that the debtors are not providing the Class 4 creditors with a present value equal to the amount of their claims on the effective date, thus violating the "best interest of creditors test."

He is seeking a prime-rate-plus interest rate on the claims of his clients, beginning on the bankruptcy petition date.

The amended plan of reorganization includes an interest rate of 3%, with the rate climbing to 7% if the claims are not paid in full by Oct. 1, 2015.

Waxman said the interest should be prime rate - currently 3.25% - plus one to three percentage points to offset the risk his clients are assuming under the plan. Those risks include inflation and the possibility that the reorganized debtors could file for bankruptcy before the Oct. 1, 2015 date.

Debtors attorney Mark A. McDermott said any post-petition interest should be paid at the federal judgment rate, which is the rate provided for civil judgments.

Waxman said that in other cases in which the debtor is solvent - which Syms is - creditors are paid in full on the plan's effective date.

But in this case, the reorganization plan calls for the reorganized Syms to become a real estate management company that will try to dispose of 13 remaining properties within one year and use the proceeds to pay creditor claims.

Mark Power, representing the official committee of unsecured creditors, said the plan also is bringing $25 million in "fresh, new money" into the estate that will be used to pay administrative and priority claims. After the administrative claims are paid, Syms' creditors are next in line, he said.

The plan includes no provision for extending the one-year deadline for selling the properties. At the end of that year, any remaining unsold properties transfer to the possession of the creditors, Power said.

Power said the committee does not support the objection. As a class, the unsecured creditors voted to accept the plan.

Judge Kevin J. Carey postponed a ruling on the objection to reflect on the facts overnight.

He scheduled a telephonic hearing for 2 p.m. ET on Aug. 30 to issue a ruling on the objection and, perhaps, a ruling on the plan confirmation motion.

Other objections overruled

Also during the Aug. 29 hearing, Carey overruled an objection by the U.S. Trustee, who had argued that exculpation of majority shareholder, chief executive officer and board chairwoman Marcy Syms, was unwarranted.

Carey said that in her roles with the company, Syms played a fiduciary role and was entitled to exculpation under the bankruptcy code.

Carey also overruled an objection by Macy's Inc., in which the department store chain argued that the trademark Filene's Basement could not be transferred to the reorganized debtors.

Macy's attorney Charles M. Tatelbaum said the agreement between Macy's and Filene's Basement was an executory contract with obligations yet to be performed.

Carey ruled that the trademark agreement was not an executory contract and could be transferred to the reorganized Filene's Basement, which will operate as a wholly-owned subsidiary of Syms.

Syms, a Secaucus, N.J.-based off-price clothing retailer, filed for bankruptcy on Nov. 2, 2011 along with wholly owned subsidiary Filene's Basement. The joint Chapter 11 case number is 11-13511.

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