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Former Gymboree U.S. Trustee opposes approval of disclosure statement
By Caroline Salls
Pittsburgh, Feb. 27 – The U.S. Trustee overseeing Gemstone Solutions Group, Inc.’s bankruptcy case objected to the disclosure statement for the company’s Chapter 11 plan, according to a Wednesday filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.
Gemstone was previously Gymboree Group, Inc.
Acting Region Four U.S. trustee John P. Fitzgerald III said in his objection that “after over a year of navigating through Chapter 11, the disclosure statement and underlying plan currently before the court reinforce what many long-feared – administrative insolvency.”
Despite the inability to pay all administrative claimants in full, aside from the professionals who had previously negotiated a carve-out with the secured lenders, Fitzgerald said Gemstone received approval of a streamlined procedure for settling administrative claims in an attempt to be able to propose a confirmable plan.
Fitzgerald said the company has now proposed a plan and disclosure statement that incorporates the settlements reached with various administrative claimants and proposes to pay administrative claimants with whom it has yet to settle either in full, to the extent they opt-out of a settlement provision or (a reduced amount of their claim, to the extent they opt-in or fail to opt-out.
As a result, the U.S. Trustee said the plan is not confirmable, in part because those administrative claimants are deemed to consent to a reduced claim amount “simply by abstaining from returning an election ballot and opting out of the proposed settlement provision.”
Gymboree is a children’s apparel specialty retailer based in San Francisco. The company filed bankruptcy on Jan. 16, 2019 under Chapter 11 case number 19-30258.
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