Lucky Bucks Holdings PIK noteholders move to convert bankruptcy case

By Sarah Lizee

Olympia, Wash., June 12 – A group of Lucky Bucks Holdings LLC PIK noteholders filed a motion Monday with the U.S. Bankruptcy Court for the District of Delaware that seeks to convert the company’s newly filed Chapter 11 bankruptcy case to Chapter 7.

Lucky Bucks Holding is the sole owner of debtor Lucky Bucks HoldCo, LLC, which, in turn, is the sole owner of debtor Lucky Bucks, LLC.

In the company’s disclosure statement for its joint pre-packaged Chapter 11 plan for the debtors, the company notes that the plan for Lucky Bucks Holdings can’t be confirmed without the acceptance of the class of PIK noteholders, which comprise all of Lucky Bucks Holdings’ creditors.

After reviewing the debtors’ solicitation materials, all members of the informal group submitted online ballots to the debtors’ claims agent rejecting the Lucky Bucks Holdings plan, which the debtors acknowledge has no reorganization purpose and is a plan of liquidation.

“Given this unanimous rejection, and Holdings’ lack of any business operations, employees or assets – other than worthless equity in [Lucky Bucks HoldCo] and the claims Holdings retains against its equity holders and management – the court should protect the Holdings estate from having to bear any further diminution or the expense associated with a futile Chapter 11 case, and immediately convert Holdings to Chapter 7 pursuant to bankruptcy code section 1112(b),” the group said in its motion.

The group also noted that the debtors have acknowledged that they do not need to confirm a plan at Lucky Bucks Holdings to reorganize the other debtors and facilitate their emergence from Chapter 11.

“Why, then, have the debtors, their insiders, and the OpCo lenders gone to such lengths to put Holdings into Chapter 11? The debtors’ filings make clear it is not for any legitimate Chapter 11 purpose,” the group said.

The group said that less than two years ago, after insiders of the company made material representations about the fundamental nature of the debtors’ business, the noteholders purchased $250 million of PIK notes, and the proceeds were then distributed between the insiders.

The group said it found that those representations were untrue only after having purchased the notes, and that the insiders, realizing Lucky Bucks’ business was “an unsustainable house of cards,” decided to “cash out through a dividend” funded by the PIK notes.

The group said that, if these facts are borne out, the $250 million payment was an actual fraudulent conveyance and improper dividend under applicable Delaware law that Lucky Bucks Holdings can successfully claw back from the insiders and any other recipients.

And to the extent Lucky Bucks Holdings was insolvent at the time of, or rendered insolvent by, the sale of the PIK notes, it also would have a claim for constructive fraudulent transfer, the group said.

“There is no doubt the Holdings claims have value, so much so that the insiders, eager for a release from the Holdings claims, placed Holdings into Chapter 11 for the sole purpose of effectuating a purported settlement between Holdings and the insiders, despite the undeniable fact that Holdings has no prospect of reorganization,” the group said.

Lucky Bucks is a Norcross, Ga.-based digital skill-based coin operated amusement machine route operator. The Chapter 11 case number is 23-10758.

© 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.