Residential Capital LLC’s disclosure statement for its reorganization was opposed by the U.S. Trustee, which oversees bankruptcy cases for the government.
The trustee said in a filing yesterday in U.S. Bankruptcy Court in Manhattan that the statement doesn’t adequately describe the plan. Also, provisions of the plan contained in the disclosure statement include impermissible payments for the reimbursement of legal expenses of certain creditors, the trustee said.
Unless the provisions at issue are removed, the plan “is not confirmable and neither the plan nor the disclosure statement may be approved,” the trustee said in the filing.
Last month, the bankrupt mortgage company filed a reorganization plan estimating unsecured creditors will recover about 36% of what they are owed, while debts backed by collateral will be paid in full.
In the disclosure statement written to help creditors decide how to vote on the plan, the New York-based company provided recovery estimates for unsecured creditors owed $2.15 billion and junior secured noteholders owed $2.22 billion.
The plan is based on a $2.1 billion settlement with ResCap’s parent, Ally Financial Inc., and creditors, including mortgage bond investors who blame both companies for their losses.
Stefan Englehardt, a lawyer representing
