World Health Alternatives unsecured creditors denied approval to form trust

By Jennifer Lanning Drey

Eugene, Ore., Sept. 11 - World Health Alternatives Inc.'s official committee of unsecured creditors' request to establish a statutory trust was denied, according to a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee had asked the court to allow it to establish the trust in order to hold the committee's rights to pursue estate claims or causes of action against CapitalSource Finance LLC if the case is converted to Chapter 7, according to the motion requesting the approval.

As previously reported, the U.S. Trustee, World Health and the Internal Revenue Service are pushing for conversion of the company's Chapter 11 case to Chapter 7.

If the case is converted, the committee said it will cease to exist, as will its ability to realize the benefits under the letter of agreement.

The committee said if the letter of agreement is ultimately approved on appeal but the committee no longer exists, CapitalSource would be able to circumvent its obligation to pay a $1.63 million carve-out to general unsecured creditors and allow CapitalSource to receive a windfall.

Based in Pittsburgh, World Health Alternatives provides staffing services for the medical industry. It filed for bankruptcy on Feb. 20, 2006. Its Chapter 11 case number is 06-10166.

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