ResCap creditors committee objects to nine-month exclusivity extension

By Jim Witters

Wilmington, Del., Sept. 5 - Residential Capital, LLC's official committee of unsecured creditors objected to the proposed nine-month extension of ResCap's exclusive period for filing a plan of reorganization and soliciting plan acceptances, according to a Sept. 5 filing with the U.S. Bankruptcy Court for the Southern District of New York.

If the court approves ResCap's request, the exclusive period for filing a Chapter 11 plan would be extended to June 11, 2013, from Sept. 11. The exclusive period for garnering votes would be extended to Aug. 11, 2013, from Nov. 10.

The committee said the extension is "not justified by the facts of these cases and is likely to inhibit, rather than promote, formulation of a confirmable Chapter 11 plan."

ResCap has failed to engage the committee in discussions about a plan, the motion states.

The committee urged the court to grant an extension tailored "to encourage tangible progress" toward a confirmable plan.

The nine-month extension requested by ResCap "would give the debtors inappropriate leverage in the negotiations" that will follow the report by an examiner investigating the estates' claims against Ally Financial, Inc., ResCap's parent, the committee said.

The leverage would allow the debtors to block the committee and other parties from proposing alternative plans, including plans that may not contain a global release for Ally, the motion states.

"The debtors' track record suggests that they will wield that leverage for Ally's benefit, delaying the direct, candid negotiations with the committee that will be necessary to reach a confirmable plan," the committee said.

The committee is seeking an extension of exclusivity to no later than March 1, 2013.

A hearing is scheduled for Sept. 11.

Residential Capital is a New York-based mortgage originator and servicer. The company filed for bankruptcy on May 14. The case number is 12-12020.

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