Synergy: U.S. trustee raises objections to amended Chapter 11 plan

By Caroline Salls

Pittsburgh, April 12 – The U.S. trustee overseeing Synergy Pharmaceuticals, Inc.’s Chapter 11 case objected Friday to the proposed confirmation of the company’s fourth amended plan of reorganization, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

U.S. Trustee for Region 2 William K. Harrington said he and other parties objected to various release and exculpation provisions in the plan at the disclosure statement stage, and Synergy made changes to the plan based on those objections.

However, Harrington said he still has concerns that the definition of released parties continues to be overly broad and that the plan provides for exculpation of a litigation trustee and plan administrator that do not yet exist and will not exist until after the plan effective date.

In addition, the U.S. trustee said the plan “impermissibly deviates from the bankruptcy code’s priority scheme without the consent of affected creditors,” as the modified plan provides for a distribution to equity security holders, while unsecured creditors are not being paid in full.

A hearing is scheduled for April 23.

Synergy is a New York-based biopharmaceutical company focused on the development and commercialization of novel gastrointestinal therapies. The company filed bankruptcy on Dec. 12 under Chapter 11 case number 18-14010.

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