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KServicing disclosure statement draws objection from U.S. trustee
By Sarah Lizee
Olympia, Wash., Jan. 11 – Kabbage, Inc.’s (doing business as KServicing) disclosure statement for its Chapter 11 plan drew an objection Wednesday from Regions 3 and 9 U.S. trustee Andrew R. Vara, according to documents filed with the U.S. Bankruptcy Court for the District of Delaware.
The U.S. trustee said he objects to the inability for creditors to opt out of third-party releases.
Under the plan, the voting classes – class 3 Reserve Bank claims and class 4 general unsecured claims – will receive ballots to cast their acceptance or rejection of the amended plan.
Vara said a review of the ballots reveals that those who vote to accept the plan do not have the option to opt out of the third-party releases.
It also appears that creditors in classes who are unimpaired and deemed to accept the plan, and those who are impaired and deemed to reject the plan, will likewise not have an option to opt out because the debtors do not propose to send these creditors any documents allowing that opportunity.
Rather, it appears that those creditors are further required to “object to the plan” to perhaps not be involuntarily bound to the third-party release, but it is unclear what is meant by “object to the plan.”
The ballots contain an option where creditors in classes 3 and 4 can denote in a box that they “abstain” from voting on the plan and opt out of the third-party release. As such, creditors who fail to submit a ballot will be deemed not to have opted out of the third-party release.
The disclosure statement hearing is scheduled for Jan. 19.
The Atlanta-based servicer and subservicer of small business Paycheck Protection Program loans filed bankruptcy on Oct. 3 under Chapter 11 case number 22-10951.
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