Nine West’s bankruptcy reorganization plan includes excessive pay for some professionals and overly broad releases of non-debtors, U.S. officials said in objections filed Jan. 11.
The U.S. Trustee, a Justice Department component, and the Securities and Exchange Commission both said that the releases improperly exclude claims for gross negligence, willful misconduct or fraud.
These releases have “special significance for public investors because they enable nondebtors to benefit” by releasing claims for their misconduct, “including violations of the federal securities laws or breaches of fiduciary duty under state law,” the SEC said.
The U.S. Trustee also objects because the plan provides for payment to professionals who represented parties to a pre-bankruptcy restructuring support agreement. It says Nine West didn’t demonstrate that those professionals contributed to the bankruptcy estates sufficiently to justify the payments under Section 503(b) of the Bankruptcy Code, nor was the professionals’ employment previously approved by order of the bankruptcy court.
Shoes, jewelry and apparel company Nine West Holdings, Inc. filed Chapter 11 in April 2018.
In June 2018 the U.S. Bankruptcy Court for the Southern District of New York approved a sale of its shoe business, including Nine West and Bandolino brands, for about $340 million. The company plans to continue to operate its jewelry and apparel businesses, including the Anne Klein brand.
The company’s plan of reorganization features a settlement with its equity holders, including Sycamore Partners and KKR Credit Advisors, who will contribute $105 million, according to disclosures filed in the case.
Under the plan unsecured lenders will receive a combination of equity in the company emerging from bankruptcy and cash.
General unsecured creditors will receive distributions ranging from 6.7 to 100 percent, depending on which of the related Nine West debtors owes the debt.
Judge Shelley C. Chapman will conduct a hearing on whether to confirm the plan on Jan. 28.
Nine West is represented by Kirkland & Ellis LLP.
The case is In re: Nine West Holdings, Inc., Bankr. S.D.N.Y., 18-10947, Objection of U.S. Trustee 1/11/19.