Vertis U.S. trustee objects to dismissal motion, settlement agreement

By Kali Hays

New York, July 14 – Vertis Holdings, Inc.’s U.S. Trustee, Roberta A. DeAngelis, objected to the company’s June 26 request that its Chapter 11 bankruptcy case be dismissed, according to a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

DeAngelis also objected to the company’s agreement with Quad/Graphics Marketing, LLC that settles all of the Vertis debtors’ obligations to Quad under an Oct. 10, 2012 asset purchase agreement with Vertis agreeing to pay Quad $300,000 by July 29.

In exchange, Quad agreed not to object to dismissal of the Vertis cases.

As previously reported, Vertis claimed that the various asset sales it has conducted “did not yield sufficient proceeds to fully repay all of the prepetition secured lenders,” resulting in the company lacking funds to confirm a Chapter 11 plan, according to the motion.

DeAngelis asserted that “the debtors’ requested relief is at odds with the requirement of the Bankruptcy Code” as Vertis is duly requesting that the court order a dismissal of its bankruptcy case while it “continues exercising jurisdiction as to matters that are central to case and estate administration,” according to the objection.

The trustee went on to claim that the proposed settlement with Quad is related to a post-petition contract and that Vertis’ “desire to dismiss these cases has created the purported necessity for the settlement.”

“The $300,000 lump sum could just as easily be used to fund other administrative expenses, including those of an orderly Chapter 7 wind-down, which would safeguard the due process rights of all creditors and parties-in-interest, not just simply the rights and interests of those parties whom the debtors have chosen to prefer,” the objection stated.

DeAngelis asked that the court deny Vertis’ dismissal and settlement motions as they are “improper and inappropriate” and a means for the company “to avoid all of the burdens of being in bankruptcy while retaining all of its benefits.”

A hearing is set for July 17.

Vertis, a Baltimore-based marketing communications company, filed for bankruptcy on Oct. 10, 2012. Its Chapter 11 case number is 12-12821.

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