From the Unsecured Creditors Argument(Doc 1033 01/08/2014):
These are just a few. The entire document is a good read. Amazing that not only did they want everyone cut out from the spectrum that sat in limbo but they wanted broad general releases from any culpability from their actions. The unsecured pointed out that the court cannot do that.
The Debtors must also modify the Plan so that value is distributed
appropriately in the event that the Debtors successfully appeal the FCC’s decision to terminatethe FCC Licenses. Throughout these cases, the Committee has been supportive of the Debtors’
efforts to challenge and appeal the FCC’s decision. It is the Committee’s view that such a reversal would be the only way that the Debtors and/or Reorganized Debtors achieve a valuation
that would satisfy all of the Debtors’ prepetition debt. Although the Committee has advocated for the pursuit of the Estate D&O Claims for the benefit of general unsecured creditors, such
claims represent only a chance to recover a small percentage of the debt owed to unsecured creditors. A successful appeal is certainly a better outcome for these chapter 11 cases and it
appears to be a real possibility given the sums and efforts being expended to either reverse the FCC Opinion or reach some other resolution with the FCC. If the appeal is successful, general
unsecured creditors are entitled to share in the value of a reorganized entity if the senior secured creditors’ claims are satisfied. The Debtors have not satisfied their burden of showing that the 2016 Noteholders are entitled to receive all of the potential upside associated with the Full Portfolio and, based upon the Committee’s analysis, the Debtors will be unable to do so.
The proposed releases are especially troublesome to the Committee given the circumstances of this case and the consistent attempts by the 2016 Noteholders to control the Chapter 11 Cases and retain all value. Under the Plan, there remains a real possibility that the Reorganized Debtors will receive back the Full Portfolio with value in excess of the 2016 Noteholders’ debt and all other creditors are left with interests in the Litigation Trust that has no viable claims or prospects for recovery. The effect, in sum, is that the 2016 Noteholders will have used the chapter 11 process to take ownership of the Debtors’ valuable spectrum portfolio
and cut out all general unsecured creditors from sharing in any of that value. The Committee is not willing to consent to a release for the 2016 Noteholders under these circumstances. Accordingly, the Committee respectfully submits that the proposed releases are prohibited in the Fifth Circuit and render the Plan unconfirmable. Any attempt by the Debtors to distinguish the facts of this case must be rejected because “there is nothing in the Pacific Lumber opinion which . . . can reasonably be read to limit its ruling to the facts of that case.” Pilgrim’s Pride, 2010 Bankr. LEXIS 72 at *16.
Conclusion:
38. Based upon the foregoing, the Plan is not confirmable because (a) the Plan does not reflect an accurate or supportable valuation of the Reorganized Debtors; (b) the Plan and Litigation Trust Agreement provide complete control over the Estate D&O Claims and
Avoidance Actions to the 2016 Noteholders; and (c) the Plan includes broad releases that are prohibited in this Circuit. The Committee respectfully requests that the Court deny confirmation
of the Plan.
