DBSI former directors ask court to deny, continue plan confirmation

By Lisa Kerner

Charlotte, N.C., Sept. 28 - Former DBSI, Inc. directors Walt E. Mott and John D. Foster filed a motion asking the court to deny confirmation of the company's proposed plan of liquidation, according to a Tuesday filing with the U.S. Bankruptcy Court for the District of Delaware.

Mott and Foster want the hearing continued for at least 30 days to allow time to obtain additional discovery and to depose the examiner, according to the filing.

The pair are also asking the court to sanction the Chapter 11 trustee James R. Zazzali and award appropriate damages for the trustee's "willful refusal" to produce DBSI director of finance Matthew McKinlay at a scheduled deposition.

The proposed plan, formulated by the Chapter 11 trustee and the official committee of unsecured creditors, is according to Mott and Foster "by far the most convoluted, overreaching, offensive and patently unfair plan of liquidation" to appear on the court's docket.

As previously reported, the plan proposed by the Chapter 11 trustee and the creditors' committee has the support of the company's true interest cost investors and note/bond/fund investors.

The company's disclosure statement was approved by the court on Aug. 18. The plan confirmation hearing is scheduled for Oct. 5.

Under the plan, non-litigation assets will be allocated to two different trusts, including a DBSI liquidating trust for the benefit of the creditors of the DBSI consolidated debtors and a DBSI real estate liquidating trust for the benefit of the creditors of note/fund consolidated debtors.

In addition, a DBSI estate litigations trust will be formed to hold estate causes of action, and a private actions trust will be formed to hold non-estate causes of action.

The liquidating trusts will be the beneficiaries of the litigation trusts.

Holders of general unsecured claims will receive beneficial trust interests, which entitle them to a share of the trust assets.

Meridian, Idaho-based DBSI controls a network of real estate entities. The company filed for bankruptcy on Nov. 10, 2008. Its Chapter 11 case number is 08-12687.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.