Oneida U.S. Trustee ordered to appoint official equity committee

By Caroline Salls

Pittsburgh, May 4 - Oneida Ltd.'s U.S. Trustee was ordered to appoint an official committee of equity security holders for the company's Chapter 11 case at the request of the ad hoc committee of equity security holders, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the motion, the company is aggressively prosecuting its Chapter 11 cases without an official equity committee acting to ensure appropriate "checks and balances."

The court said in its ruling that it agreed that the proper checks and balances were not being used.

The court said there is a dispute on whether the company is solvent, and the official committee of unsecured creditors does not have a clear mission.

The equityholders said the recently appointed official creditors' committee does not serve the function because the company's proposed plan of reorganization gives unsecured creditors 100% cash payment.

Since shareholder value is being compromised in these cases, the equityholders said only an official equity committee can effectively play the role of overseer.

As a result, the motion said there is a very good chance that, absent the appointment of an official equity committee, a plan will be confirmed based on an artificially depressed enterprise valuation; senior creditors will be able to immediately realize a substantial premium on their stock in the reorganized debtor; the plan will deprive parties at lower levels of the capital structure of their rightful value under the plan; and difficult and long litigation will ensue.

Oneida, based in Oneida, N.Y., makes flatware, dinnerware, crystal and metal serving pieces for consumers and the food services industry. Its Chapter 11 case number is 06-10489.

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