EYP Group’s motion to assume restructuring support agreement denied

By Sarah Lizee

Olympia, Wash., June 27 – EYP Group Holdings, Inc.’s motion seeking approval to assume a restructuring support agreement was denied Monday by the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the motion had drawn an objection from some of the company’s creditors, including GreatBanc Trust Co., Long Point Capital Partners III, LP, Long Point Capital Fund III, LP, Long Point Capital, Inc., Ira Starr, Eric Von Stroh and Norman Scherr.

The RSA is with some current and former employees, including some members of management, who hold structurally subordinated notes against EYP Group and EYP Holdings, Inc., which are two holding companies with no operations of their own.

The agreement contains a term sheet for a proposed plan of liquidation, which provides significant distribution to the employees, while leaving more senior creditors of EYP, Inc., the only operating company and owner of all of the operating assets of the bankruptcy estates, with unpaid claims, the objectors said.

The RSA also requires the debtors to pay the prepetition indemnification claims of two former directors up to $900,000 in total; waive a $171,181 promissory note issued by one of the former directors in favor of the debtors; and reimburse counsel to the consenting parties up to a total of $1.15 million of restructuring support fees.

“As an initial matter, it is hard to see any legitimate purpose that the RSA serves in these Chapter 11 cases,” the Long Point parties said in their objection.

They added that the debtors made it clear in their first-day filings what their strategy is: a prompt sale of the debtors’ assets funded by the prepetition secured party, followed by distribution of the sale proceeds and subsequent liquidation of the debtors’ estates.

“The only relevant restructuring transaction in these cases is the sale of the debtors’ assets, and the RSA provides no benefit with respect to that process,” the Long Point parties said.

The objectors said that all the RSA seeks to do is subvert the priority scheme under the bankruptcy code and redirect value from senior creditors to subordinate creditors.

Albany, N.Y.-based EYP is an integrated design firm specializing in higher education, health care, government and science & technology. It filed bankruptcy on April 24 under Chapter 11 case number 22-10367.

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