UPC Polska unsecured creditors committee files motion to recharacterize claim

By Carlise Newman

Chicago, Nov. 4 - UPC Polska's committee of unsecured creditors has filed a motion to begin an action on behalf of the company's estate that would re-characterize claims.

In doing so, the creditors are saying that they are disputing the company's position that their role is to "rubber-stamp" the terms of the restructuring agreement agreed before the bankruptcy filing.

Under the pre-petition restructuring agreement, some noteholders are required to vote their claims in favor of the reorganization plan.

However, in their filing with the U.S. Bankruptcy Court for the Southern District of New York, the creditors argue that to passively agree with the company would be not only contrary to the dictates of the bankruptcy code but a clear obstacle to the fiduciary duty of every official committee member to negotiate the terms of a plan of reorganization that will be fair to all unsecured creditors.

The committee seeks to commence an adversary proceeding to re-characterize a claim for $250 million of intercompany transfers as equity interests, or, as an alternative, equitably subordinate the alleged claim and equitably subordinate an additional $65 million of the claims held by parent UPC Telecom because of what the committee claims is inequitable conduct.

Together, equitable relief regarding these two claims would allow for subordination of one-half of the total claims which are contemplated to receive distributions under the plan.

The committee previously objected to the disclosure statement, saying the estimated percentage recoveries in the disclosure statement are based on a value of $234 million. The committee's financial advisors determined that the company's enterprise value is materially higher than $234 million. Under Chanin's preliminary analysis Classes 3 and 5 would receive the same percentage recoveries on their claim, but Class 4 - the only class of insider-creditors - would receive a percentage recovery of 49%.

The committee alleged that the company and its insider unsecured creditors have wrongfully transferred funds among and between themselves and jerrybuilt the valuation process in the hope of misleading the court, the committee and non-insider unsecured creditors, the committee said.

However the court confirmed the disclosure statement.

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