Manchester tweaks plan to award new subsidiary interests to senior secured lenders

By Caroline Salls

Pittsburgh, June 17 - Manchester Inc. amended its plan of reorganization Tuesday to award new subsidiary interests to the holders of secured senior lender claims, according to a filing with the U.S. Bankruptcy Court for the Northern District of Texas.

Under the amended plan, the secured lenders will also still receive 100% of the new common stock in the reorganized company.

In connection with the company's plan to distribute new subsidiary interests to the secured lenders, holders of existing subsidiary interests are not scheduled to receive any distribution under the plan. These creditors were previously slated to retain their interests.

As previously reported, Manchester's plan of reorganization was approved June 12, subject to the naming of an acceptable liquidation trustee, according to a source familiar with the case.

The plan is based on terms proposed by Palm Beach Multi-Strategy Fund LP.

The reorganization depends on the deposit of $3 million, a portion of which will be used to satisfy the claims of unsecured creditors.

As part of the proposal, claims asserted by Manchester against Palm Beach in cases pending in the U.S. Bankruptcy Court and in the District Court, 101st Judicial District, Dallas County and the claims asserted by the fund against the current officers and directors of the company will be resolved.

Creditor treatment

Treatment of creditors under the amended plan will include:

• Holders of $200,000 in priority tax claims and $3.74 million in priority non-tax claims will recover 100% in cash;

• Holders of $423,000 in M&I secured bank claims will have their claims reinstated;

• Holders of senior lender secured claims will receive 100% of the new common stock and new subsidiary interests in the reorganized company for a 100% recovery;

• Holders of $23.38 million in general unsecured claims will recover 12.6% in plan cash and leftover cash after priority and administrative claims are paid in full, and these creditors will receive litigation trust funds after all expenses are paid in full and the company's senior lender is reimbursed for leftover cash, seed cash and $2.5 million in plan cash;

• Holders of senior lender unsecured claims will receive a share of any litigation trust funds remaining after payment of litigation trustee fees and expenses, senior lender reimbursement and payment to general unsecured creditors;

• Holders of $2.84 million in Lancelot settlement claims will be treated either as secured claims or general unsecured claims, which will be decided by the court;

• Holders of parent common stock interests will receive a share of liquidation trust funds after payment of trust fees and expenses, senior lender reimbursement, payment in full to general unsecured and unsecured lender claims and an additional $500,000 reimbursement of plan cash; and

• Holders of subsidiary equity interests will receive no distribution under the plan.

Manchester, a Dallas-based auto dealership that sells and finances used cars to buyers with limited credit histories or past credit problems, filed for bankruptcy on Feb. 7, 2008. Its Chapter 11 case number is 08-30703.

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