Multi-Color Request to Nix Creditor Group Challenged by DOJ Unit

Efforts by Multi-Color Corp. and its secured lenders to dissolve a government-appointed creditor group met pushback by the Justice Department’s bankruptcy watchdog and unsecured creditors, who argued that the label-maker is trying to silence oversight and stymie due process.

The Justice Department’s bankruptcy monitor, the US Trustee, has the legal authority to appoint an unsecured creditors’ committee and the bankruptcy court lacks the power to disband the group, the watchdog unit said in a Thursday motion in the US Bankruptcy Court for the District of New Jersey.

Multi-Color, its private equity firm sponsor Clayton Dubilier & Rice LLC, and its lenders have said the committee, which was recently appointed by the US Trustee’s office, is too costly and some of its members have conflicts of interest.

“The Debtors simply do not like that the Committee was formed or its membership,” the US Trustee said. “A desire to limit administrative expenses is not justification or authority for disbanding the Committee.”

Judge Michael Kaplan plans to consider motions to disband the committee on April 7. A three-day bankruptcy plan confirmation hearing is set to begin on April 13.

Atlanta-based Multi-Color filed for Chapter 11 at the end of January with plans to quickly win approval of a lender-backed deal via a “prepackaged” bankruptcy plan to cut its debt from about $6 billion to $2 billion.

The US Trustee’s office first appointed a three-member committee on March 18, two days after Kaplan overruled objections arguing Multi-Color shouldn’t have filed in New Jersey because it lacked proper connections to the state.

Multi-Color has said its bankruptcy is a routine “prepack” where unsecured creditors won’t be harmed, but the committee argued that the plan is “prepackaged in name only” and faces significant confirmation issues.

The committee includes UMB Bank NA in its role as a trustee for about $1.2 billion in unsecured notes and James Castillo, who is pursuing a wage-and-hour class action against the company.

The US Trustee’s office removed Shenkman Capital Management Inc., a noteholder and a member of a minority holdout group with about $144 million in unsecured notes, from its role on the committee Thursday after Multi-Color argued that it has conflicting fiduciary duties.

The company made the same argument about UMB, but unsecured creditors said Thursday that UMB represents holders of about $160 million in notes who require representation because they don’t belong to another creditor group.

Multi-Color argues the committee’s appointment came too late. It also contends that delays and costs from the committee could drain funds needed to pay claims.

The committee said Multi-Color’s push to get rid of the group violates its due process and statutory duties.

The US Trustee pushed back on Multi-Color’s alternative request to block any committee actions for 75 days and cap the group’s professional fees at $200,000, arguing any issues can be fought via objections.

The committee said the proposed cap and freeze is “insulting and laughable” and would neuter its fiduciary role given the complexity of the case.

Multi-Color is represented by Kirkland & Ellis LLP and Cole Schotz PC. The secured creditor group is represented by Milbank LLP and Chiesa, Shahinian and Giantomasi PC. The committee is represented by Pachulski Stang Ziehl & Jones LLP. The cross-holder group is represented by Jones Day and Wollmuth Maher & Deutsch LLP. Clayton Dubilier & Rice LLC is represented by Latham & Watkins LLP, Lowenstein Sandler LLP, and Debevoise & Plimpton LLP.

The case is Multi-Color Corp., Bankr. D.N.J., No. 26-10910, motions 3/25/26, Bankr. D.N.J., No. 26-10910, objections 4/2/26.