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Keywords

motiontrustbankruptcychapter 11 bankruptcy

equitymotionbankruptcy

Related Cases

In re Hills Stores Co., 137 B.R. 4, 26 Collier Bankr.Cas.2d 1038

Facts

The case began when Hills Stores Co. filed for Chapter 11 bankruptcy on February 4, 1991, operating 154 department stores with $2.1 billion in sales. The U.S. Trustee appointed a single committee of unsecured creditors shortly after the filing, which included representatives from various creditor groups, including subordinated bondholders. The bondholders later argued that their interests were not adequately represented due to conflicts with senior creditors and sought the formation of a separate committee or subcommittee.

This case was commenced on February 4, 1991 when Hills Stores Co. and the other related debtors (collectively, Hills or the Debtor) filed voluntary chapter 11 petitions. All were continued in the management of their businesses as debtors in possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code, 11 U.S.C. §§ 1107 and 1108.

Issue

Whether the subordinated bondholders were entitled to the appointment of a separate committee or subcommittee to represent their interests in the Chapter 11 bankruptcy proceedings.

The motion by the subordinated bondholders for the appointment of a subordinated bondholders' sub-committee of the Official Committee of Unsecured Creditors or, in the alternative, an official committee of subordinated bondholders is denied.

Rule

Under Section 1102(a)(2) of the Bankruptcy Code, the court may appoint additional committees of creditors if necessary to assure adequate representation. The court has discretion to determine if additional committees are warranted based on the facts of the case.

Section 1102(a)(2) of the Bankruptcy Code provides that '[o]n request of a party in interest, the court may order the appointment of additional committees of creditors or equity holders if necessary to assure adequate representation of creditors or of equity security holders.'

Analysis

The court analyzed the arguments presented by the subordinated bondholders regarding their representation and found them to be speculative and unsupported by evidence. It noted that the existing committee had adequately represented the interests of all unsecured creditors, including the subordinated bondholders, and that conflicts among creditors are common in reorganization cases. The court emphasized that the bondholders had representation on subcommittees and that their claims of underrepresentation did not warrant the formation of a separate committee.

The court analyzed the arguments presented by the subordinated bondholders regarding their representation and found them to be speculative and unsupported by evidence.

Conclusion

The court denied the motion for the appointment of a separate committee or subcommittee for the subordinated bondholders, concluding that the existing committee provided adequate representation and that the bondholders' claims were not substantiated.

Who won?

The prevailing party was the existing committee of unsecured creditors, as the court found that they adequately represented the interests of all unsecured creditors, including the subordinated bondholders.

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