Chassix committee objects to mandated creditor releases in plan voting

By Kali Hays

New York, April 17 – Chassix Holdings, Inc.’s official committee of unsecured creditors objected to the company’s proposed restructuring plan and related disclosure statement in a motion filed Friday with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the company’s plan is based on an agreement reached with 80% of its unsecured bondholders and 71.5% of its senior secured bondholders, its existing sponsor and all of its largest customers.

Specifically, the plan provides for a debt-for-equity swap that will significantly reduce Chassix’s outstanding bond debt and debt payment obligations. Roughly $375 million of the company’s senior secured notes and $158 million of its unsecured notes will be converted to equity, according to court documents.

The plan also incorporates agreements with original equipment manufacturer (OEM) customers and a global settlement with existing equity sponsor Platinum Equity Customers and an informal committee of noteholders.

Though Chassix has already agreed to include a supplement during the solicitation of the plan explaining the committee’s concerns regarding the plan, the committee remains in objection “to the mechanics by which the debtors intend to bind voters to the third party release.”

“The intent of the debtors proposed mechanics is obvious: to coerce creditors into releasing all direct claims and causes of action against certain third parties – including, most notably, the debtors equity sponsor and their directors and officers – related to certain prepetition conduct,” the objection stated.

The third-party release provision in the plan is a requirement for acceptance of the plan and includes a release for fraud, gross negligence and willful misconduct related to the issuance of the unsecured notes and the use of any proceeds from the issuance.

In its objection, the committee said that “claimholders should not be forced to choose between voting to reject the plan and risk receiving nothing if the rest of their class follows suit [or] voting to accept the plan and being compelled to grant the extraordinarily broad third party release.”

“In addition, given the breadth of the third party release, the creditors committee believes that the decision to grant a release should be affirmative and not a trap for the unknowing.”

The creditors committee asked that the court approve its proposed modifications to the plan and disclosure statement related to the solicitation and release in order to “ensure that creditors will not be unduly prejudiced in exercising their rights in voting on the plan.”

A hearing to consider the disclosure statement is set for April 23.

Chassix, a Southfield, Mich.-based manufacturer and supplier of aluminum and iron chassis sub-frame components, including steering knuckles, control arms, sub-frames and assemblies, filed for bankruptcy on March 12. The Chapter 11 case number is 15-10578.

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