Starry Group’s plan releases draw objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., March 27 – Starry Group Holdings, Inc.’s disclosure statement for its Chapter 11 plan drew an objection 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.

Vara said the court should deny the disclosure statement motion unless the debtors change the plan’s third-party releases from opt-out to opt-in, and modify the solicitation procedures accordingly.

In addition, the plan has a “death trap” where holders of general unsecured claims who vote to reject or opt-out of the third-party releases would receive no distribution.

If the court requires an opt-in mechanism, then any death trap should be narrowed to apply only to creditors who vote to reject, Vara said.

Creditors who do not opt-in – for example, by not returning a ballot – should not forfeit their distributions, he said.

Included among those upon whom the debtors seek to impose a non-consensual third-party release are public shareholders who are to receive nothing under the plan and are deemed to reject.

Because the interest holders will receive no consideration for any release, they should be eliminated entirely from the parties who will be giving third-party releases, Vara said.

“These issues should be determined now, so that the ballots can be revised to reflect an opt-in mechanism, and so that creditors will know at the outset of solicitation how opting in to or opting out of the third-party releases will affect their plan distributions,” the U.S. trustee said in his objection.

The disclosure statement hearing is scheduled for March 31.

Starry is a Boston-based internet service provider. The company filed bankruptcy on Feb. 20 under Chapter 11 case number 23-10219.

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