GBG USA Chapter 11 liquidation plan draws objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., Jan. 20 – Global Brands Group Holding Ltd. subsidiary GBG USA Inc.’s Chapter 11 plan of liquidation drew an objection on Thursday from Region 2 U.S. trustee William K. Harrington, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

The U.S. trustee said he objects to confirmation of the plan because it provides for the release of certain claims against non-debtor third parties without the claimants’ affirmative consent.

“As parties cannot be deemed to consent to third-party releases without specifically manifesting that consent, a party’s vote in favor of only the plan, which involves claims against debtors, must be distinguished from a party’s consent to the third-party releases, which involve claims against non-debtors,” Harrington said in his objection.

“Accordingly, the plan should not be approved unless it is modified to provide that the releasing parties are not bound by the release provision unless they specifically manifest their consent to extinguish their claims against the released parties.”

Harrington also said the scope of the third-party releases is too broad.

“Specifically, the plan adequately identifies neither the releasing nor the released parties under the plan,” the U.S. trustee said.

“Many of the unidentified releasing parties have not been – and cannot be – given an opportunity to consent to grant such releases.”

Harrington said the third-party releases are consensual only with respect to holders of claims who both have received a ballot with an “opt in” box with respect to the releases, and check that box.

The debtors, however, have not secured appropriate consent from all parties subject to the releases under the plan, he said.

The U.S. trustee also said the debtors haven’t shown that the releases are permissible under any test.

“As to the parties to be released, the list is very long, as it includes a wide variety of non-debtor third parties whose connection to these cases may be tenuous or non-existent,” Harrington said.

“Furthermore, the plan fails to explain what, if any, substantial contribution the multitude of released parties made to the success of these Chapter 11 cases.”

The combined hearing on the disclosure statement and plan is scheduled for Jan. 28.

New York-based GBG USA is primarily engaged in operating a wholesale and direct-to-consumer footwear and apparel business in North America. The company filed bankruptcy on July 29 under Chapter 11 case number 21-11369.

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