Picture People’s plan of liquidation faces opposition from Monroe

By Angela McDaniels

Tacoma, Wash., Feb. 13 – TPP Acquisition, Inc.’s plan of liquidation is facing pushback from Monroe Capital Management Advisors, LLC, according to a filing with the U.S. Bankruptcy Court for the Northern District of Texas.

Monroe is the agent under the company’s pre-prepetition senior secured credit facility and post-petition secured debtor-in-possession credit facility.

On Nov. 8, the company, which does business as the Picture People, sold substantially all of its assets to TPP Operating, Inc., as designee, under an asset purchase agreement with Monroe Capital Partners Fund LP and Monroe Capital Corp.

The company’s remaining assets will be liquidated. The net proceeds will be distributed to creditors under the plan of liquidation, which was filed jointly by the company and the official committee of unsecured creditors on Feb. 1.

Monroe believes the company’s plan of liquidation includes “certain fundamental flaws” that “render it unconfirmable” without changes.

In the filing, Monroe takes issue with the treatment of class 1 claims under the plan and calls the plan’s exculpatory provision “overbroad.”

Treatment of class 1 claims

Monroe’s senior secured lender allowed claims are classified in class 1 under the proposed plan and are considered unimpaired and therefore not entitled to vote on the plan.

In the proposed plan, Monroe, as DIP lender, will receive the remaining undisbursed balance of the wind-down reserve “subject to the committee’s or liquidation trustee’s right (if any) to challenge such obligation under the DIP order, or the TPP sale order, or applicable law (including recoupment or setoff) based on claims or rights of action accruing after the entry of the DIP order or TPP sale order, as applicable.”

Under the order approving the sale of most of the company’s assets, no such restriction is placed on the return of the remaining reserve. Monroe said the new restriction “impermissibly attempts to modify the sale order in a manner that is prejudicial to Monroe – and without Monroe’s consent.”

Second, Monroe calls the plan’s proposed treatment of its class 1 claims “problematic” because it “attempts to effectuate an absolute return of any and all claims held by Monroe that are not related to either the DIP financing obligations or the pre-petition financing obligations” as defined in the sale order.

According to Monroe, “this goes well beyond the limited claims waiver” contained in the sale order.

Exculpatory provisions

According to the filing, the plan proposes to grant a comprehensive exculpation blanket covering, among others, the company’s chief restructuring officer, the committee and its individual members and all of the estate’s professionals, from and against any event occurring before the beginning of the Chapter 11 case or during the course of the case relating to the Chapter 11 case, the plan of liquidation, the DIP credit agreement, the company’s business, the decision to file for bankruptcy, the wind down and operation of the company’s during the Chapter 11 case, the administration of the Chapter 11 case, the negotiation and implementation of the plan, the confirmation of the plan, the consummation of the plan, the administration of the plan and the property to be distributed under the plan.

Monroe believes that it may make affirmative claims against the creditors committee, its members and its professionals – claims that Monroe has not agreed to waive.

“The plan proponents’ attempt to foreclose Monroe from asserting and later prosecuting such claims, or raising such claims as defenses and/or counterclaims in the committee action or otherwise, and/or asserting any independent rights of action held by Monroe against anyone other than the debtor ... renders the plan’s exculpation and injunction provisions entirely inappropriate and prejudicial to Monroe,” Monroe said in the filing.

“The plan’s grant to these parties of comprehensive releases is wholly impermissible absent Monroe’s express consent, which consent shall not be forthcoming.”

The Picture People is an operator of professional portrait studios. The company filed for bankruptcy on Sept. 2 under Chapter 11 case number 16-33437.

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