Buffets creditors committee calls proposed plan of reorganization 'unconfirmable'

By Jennifer Lanning Drey

Portland, Ore., Nov. 17 - Buffets Holdings, Inc.'s official committee of unsecured creditors objected to the company's disclosure statement for its plan of reorganization, calling the plan "unconfirmable," according to a Friday filing with the U.S. Bankruptcy Court for the District of Delaware.

The committee said the plan cannot be confirmed because it was not proposed in good faith.

According to the committee, Buffets' plan of reorganization is based on a valuation settlement that is "essentially a 100% victory for the pre-petition secured credit facility lenders without ever having engaged the committee in the process of the settlement or the formulation of the plan."

The committee said under the plan, Buffets' current management will receive 10% of the new equity in the company under a management incentive plan, while general unsecured creditors would only receive 3.3% or 5.3% of the equity of the reorganized company if they vote to accept the plan.

General unsecured creditors are slated to receive 0.6% or 1.0% if they vote to reject the plan.

The creditors noted that the issuance of shares under the management incentive plan would further dilute their recovery.

As previously reported, Buffets' pre-bankruptcy senior secured loans will receive 93.7% to 96.1% of the newly issued common stock in the reorganized company.

In its objection, the committee also claimed it was not included in the provisions that provide releases, exculpation and an injunction, even though they do include the company, its debtor-in-possession lenders and the pre-petition secured credit facility lenders.

Additionally, the committee said the plan lacks adequate transparency regarding the compromise and settlement of the valuation litigation that was reached between the company and the valuation defendants.

Buffets Holdings, a steak-buffet restaurant company based in Eagan, Minn., operates restaurants under the names Old Country Buffet, HomeTown Buffet, Ryan's and Fire Mountain. The company filed for bankruptcy on Jan. 22, 2008, and its Chapter 11 case number is 08-10141.

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