Times Square Crowne Plaza disclosure statement draws objection

By Sarah Lizee

Olympia, Wash., Jan. 30 – Times Square JV LLC’s disclosure statement drew an objection from the U.S. trustee overseeing the case, according to documents filed Friday with the U.S. Bankruptcy Court for the Southern District of New York.

Region 2 U.S. trustee William K. Harrington said the plan and disclosure statement improperly designate third-party releases imposed upon creditors who abstain from voting or are presumed to accept the plan as consensual without providing an appropriate procedure to opt-in to the releases (as opposed to opt-out) or sufficient information for such creditors to affirmatively demonstrate that they have knowingly consented to the proposed third-party releases.

Harrington also said the disclosure statement and plan only provide for an impermissible opt-out procedure.

“The debtors attempt to obtain ‘consent’ merely by an inference from silence or inaction, which stretches the boundaries of what constitutes consent and does not provide a clear and transparent procedure to demonstrate informed and knowing consent with respect to the third-party releases,” the U.S. trustee said in his objection.

“Moreover, the disclosure statement fails to explain why the opt-out procedure set forth in the plan is justified, or to demonstrate that affected creditors knowingly consented to the third-party releases.”

Harrington said that if the debtors seek to impose the third-party releases upon holders of non-voting claims, the plan must make that intent clear, and provide for a means of allowing the affected party to affirmatively consent to such releases.

As previously reported, the official committee of unsecured creditors also objected to the disclosure statement.

A hearing on the disclosure statement is scheduled for Feb. 1.

Times Square JV owns the Crowne Plaza hotel in Times Square in New York. The company filed Chapter 11 bankruptcy on Dec. 28 under case filing number 22-11715.

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