Crystallex shareholders seek appointment of Chapter 15 examiner

By Sarah Lizee

Olympia, Wash., Aug. 20 – Crystallex International Corp. shareholders are seeking appointment of a Chapter 15 examiner to the company’s bankruptcy case, according to court documents filed Friday with the U.S. Bankruptcy Court for the District of Delaware.

“The attempts to persuade the debtor, the monitor and the CCAA court to investigate and resolve the issues involved have been fruitless,” the motion said.

“And seeking to redress the harm in the CCAA court was a financial and logistical impossibility from the outset.”

The shareholders said the restrictions imposed and the cost to overcome these are “well beyond the means” for individual shareholders to afford, especially in a proceeding almost 10 years old and still open.

The group claims the investigation and report by the examiner are a fundamental fact-finding requirement to aid the court to obtain an independent assessment of the harms against the estate and the shareholders to assure that the debtor’s plan of arrangement or liquidation meets the “fair and equitable” requirement of the bankruptcy code.

“The harms against the estate and the shareholders represent statutory breaches that left unresolved will result in irreparable harm to both,” the shareholders said.

The group claims there is a controlling DIP lender and “self-interested” board of directors who arranged first to control it, then arrange the approval of the DIP lender’s entitlement to the net proceeds from an arbitration award worth about $1.6 billion.

“Other misconduct includes improper transfer of tax benefits from the estate to the DIP lender, transfer of valuable mining data for no consideration, improper waiver of the right to receive substantial interest in the hundreds of millions of dollars, an improper agreement with noteholders to pay excessive interest on their claims to waive their right to require the timely filing of plan of arrangement or liquidation, mismanagement of the estate’s property and improper oversight over its interests,” the group said.

Crystallex, a mining company based in Toronto, filed a Chapter 15 bankruptcy case on Dec. 23, 2011. The case number is 11-14074.

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