U.S. Trustee: Stearns disclosure statement lacks sufficient details

By Caroline Salls

Pittsburgh, Sept. 20 – The U.S. Trustee overseeing Stearns Holdings, LLC’s Chapter 11 case objected to approval of the disclosure statement for the company’s proposed plan of reorganization, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Region 2 U.S. trustee William K. Harrington said in the objection that “the disclosure statement should not be approved because it fails to provide creditors with sufficient information to allow them to make an informed choice as to whether to approve or reject the plan.”

Specifically, Harrington said the disclosure statement provides that the unsecured creditors in classes 4 and 5 will be paid in full, but without interest.

Despite the proposal to pay these two classes of creditors without interest, the U.S. Trustee said they have been designated by Stearns as unimpaired and as such not entitled to vote to on the plan, in conflict of a law that says that failure to pay post-bankruptcy interest to unsecured creditors, regardless of whether the debtor is insolvent or solvent, renders the class of creditors as impaired.

As a result, Harrington said the company must provide sufficient information in the disclosure statement so that interested creditors can understand and evaluate the chance for confirmation of a plan that does not allow unsecured creditors to vote on the plan.

In addition, the U.S. Trustee said the plan improperly calls for Stearns to pay the fees and expenses of unretained professionals, and the disclosure statement does not provide the legal basis for the company’s argument that these cases can be confirmed despite provisions in the plan that are not authorized by either the Bankruptcy Code or appropriate case law.

Stearns is a Santa Ana, Calif.-based independent mortgage origination and servicing company. The company filed bankruptcy on July 9 under Chapter 11 case number 19-12226.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.