Mercer County State Bank, Developers Surety and Indemnity Co., Allegheny Mineral Corp. Among Creditors Filing Objections to Debtor’s Amended Plan

As posted previously, the Debtor on 2/17/11 filed an Amended Chapter 11 Plan of Reorganization (“Amended Plan”) and Amended Disclosure Statement.  On 3/28/11, Mercer County State Bank (the “Bank”) filed an Objection to the Amended Plan alleging that there will be insufficient cash flow to support the debt service on the proposed $2 million plan financing.  In addition and among other grounds, the Bank also objected to the extent that there does not appear to be sufficient funds available at closing to satisfy all existing lien holders on the collateral being pledged to the Bank.  

Also on 3/28/11, Developers Surety and Indemnity Company also filed an Objection to the Amended Plan to the extent that it is an impaired creditor since it must subordinate its status as a judgment creditor to the Bank.  In addition, Allegheny Mineral Corporation filed an Objection to the Amended Plan to the extent that it does not believe that the Debtor is able to satisfy the requirements for confirmation for the following reasons: (1) the Amended Plan contains an improper classification of claims, (2) the Amended Plan exhibits a lack of good faith in that the improper classification was effectuated solely for the purposes of getting an impaired class to vote in favor of the Amended Plan, (3) the feasibility of the Amended Plan is in question because the Debtor’s financial projections are doubtful, and (4) the Amended Plan fails to overcome the “absolute priority rule” in that the “new value” exception has not been met.

Additionally, both the Internal Revenue Service and the Pennsylvania Department of Revenue filed Objections to the Amended Plan based on the its failure to provide statutory interest on a portion of their respective claims.  The Pension Benefit Guaranty Corporation also filed an Objection to the extent that the Amended Plan fails to include the requisite language explaining how the Debtor intends to treat its alleged obligation to provide retirement benefits to its employees; as such language was included in the Amended Disclosure Statement.

Finally, CAT Financial (“CAT”) filed an Objection to the Amended Plan to the extent that its fails to specify a time for closing and to the extent that it seeks to modify provisions of CAT’s security agreement.  

A hearing on the approval of the Amended Plan is currently scheduled for 4/1/11, at 10:00 a.m. in the Bankruptcy Courtroom, U.S. Courthouse, 17 South Park Row, Erie. 

Court enters Order Approving Disclosure Statement and Scheduling Hearing on Plan Confirmation

On 3/1/11, the Bankruptcy Court entered an Order Approving Disclosure Statement and Scheduling Hearing on Plan Confirmation (“Order”) with respect to the Debtor’s Amended Chapter 11 Plan of Reorganization (“Plan”) and Amended Disclosure Statement previously filed on 2/17/11.  On or before 3/11/11, creditors will receive copies of these materials, including an official Ballot for the purposes of voting in favor of or against the Debtor’s Plan.  

In addition, the Order further sets for that 3/28/11 is the deadline for filing written ballots by creditors, for filing claims not already barred, and for filing objections to confirmation of the Plan.  

Finally, the Order further sets forth that 4/1/11 is the deadline for filing a complaint objecting to the Debtor’s discharge.  A hearing on the confirmation of the Plan has also been scheduled for 4/1/11 at 10:00a.m. in the Erie Bankruptcy Courtroom, United States Courthouse, 17 South Park Row, Erie, Pennsylvania 16501.