Former Sharper Image eyes case dismissal after creditor distribution

By Caroline Salls

Pittsburgh, July 17 - TSIC, Inc., formerly Sharper Image Corp., and its official committee of unsecured creditors are seeking court approval of proposed procedures for dismissing the company's Chapter 11 case, distributing funds to general unsecured creditors and disallowing some gift card claims, according to a Monday filing with the U.S. Bankruptcy Court for the District of Delaware.

Although the liquidation sale of substantially all of the company's assets did not render the estate administratively solvent, TSIC said administrative solvency was achieved through a number of successful actions, including prosecution of a fraudulent transfer action against its founder and former chief executive officer.

The company said the fraudulent transfer action resulted in a more than $3 million payment to the estate.

TSIC said it does not have enough funds to pay priority creditors in full and will not be in a position to satisfy plan confirmation requirements.

According to the motion, allowed administrative claims and priority creditors slated to receive a distribution have been paid in full or will be before the proposed conclusion of the case.

Because there are no viable assets remaining for a Chapter 7 trustee to marshal or monetize and no estate funds available for distribution to unsecured creditors, the company said case dismissal would be in the best interests of its estate.

Unsecured creditor distribution

TSIC said the committee's counsel is holding $500,000 of non-estate funds in escrow related to the settlement of the committee's objection to the sale of the company's intellectual property and other assets.

Under court order, those funds can only benefit the company's general unsecured creditors.

"Given the enormous size of the estimated $160 million allowed unsecured claims pool and the comparatively miniscule amount of funds available for distribution to unsecured creditors," TSIC and the committee said the estate would be best served by an informal unsecured claims resolution process "that strikes a fair balance between the due process rights of unsecured claim holders and the economic realities of this case."

Following the distributions to unsecured creditors, the company and committee proposed that a final professional fee hearing be scheduled and TSIC's case dismissed.

A hearing is scheduled for Aug. 13.

Sharper Image, a San Francisco-based specialty retailer, filed for bankruptcy on Feb. 19, 2008. Its Chapter 11 case number is 08-10322.

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