USA Gymnastics hearing on disclosure statement continued to Oct. 25

By Sarah Lizee

Olympia, Wash., Oct. 20 – USA Gymnastics’ hearing on approval of the disclosure statement for its amended Chapter 11 plan of reorganization has been continued to Oct. 25 from Oct. 19, according to a minute entry filed Tuesday with the U.S. Bankruptcy Court for the Southern District of Indiana.

The amended plan, which is being proposed by both USA Gymnastics and the additional tort claimants committee of sexual abuse survivors, provides two alternatives for abuse claims: the full or partial settlement alternative, or the litigation only alternative.

Under the full or partial settlement alternative, if the commercial general liability (CGL) insurers each accept the survivors’ committee’s CGL insurer settlement offer, which is $425 million in total, a trust will be created for the benefit of abuse claimants and future claimants and will be funded by the total settlement demand amount, less the professional fee hold-back, and the $2 million Twistars payment.

If less than all CGL insurers accept the survivors’ committee’s CGL insurer settlement offer, then the survivors’ committee and the debtor may jointly elect the partial settlement option and a trust will be created for the benefit of abuse claimants and future claimants and will be funded by the payments by the partial settlement option accepted parties, less the professional fee hold-back, the Twisters payment, and the assignment of insurance claims. Abuse claimants whose claims are covered by a non-settling insurer’s policy may elect to pursue litigation against the debtor and any other defendant subject to the terms of the plan.

Under the litigation-only alternative, which will occur if the CGL insurers do not commit to fund the total settlement demand amount and the debtor and the survivors’ committee do not jointly elect to proceed with the partial settlement option, the plan permits all holders of abuse claims to prosecute their claims against the reorganized debtor in name only in the courts where those claims were pending before the petition date, or the courts in which those claims could have been brought if not for the automatic stay imposed by the bankruptcy code.

Other priority claims, the PNC Bank claim, the Sharp claim and the general unsecured convenience claims will be unimpaired under the plan.

General unsecured claims will be paid from existing and future revenues of the reorganized debtor over three years at 80% in equal annual installments, starting on Aug. 15, 2022.

The claimant holding the personal injury claim will be permitted to prosecute the personal injury claim against the reorganized debtor.

Holders of the USOPC claim and indemnification claims will not receive a distribution under the plan.

Under the full or partial settlement alternative, a trust will assume all liability for and will pay all FCR claims, provided that no holder will have an interest in the trust assets other than the future claimant reserve. Under the litigation only alternative, the FCR claimholders receive nothing, provided that to the extent that the holder has a right to recovery under any of the debtor CGL insurance policies, those rights are preserved and will not be impaired under the plan.

Holders of sexual abuse claims filed after the bar date will receive no distributions under the full or partial settlement alternative. Under the litigation only alternative, they will not receive a distribution, but to the extent that holders have a right to recovery under any of the debtor CGL insurance policies, those rights are preserved and will not be impaired.

The Indianapolis-based gymnastics organization filed bankruptcy on Dec. 5, 2018 under Chapter 11 case number 18-09108.

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