Former Loot Crate: Trustee calls for conversion or dismissal of case

By Sarah Lizee

Olympia, Wash., June 7 – Old LC, Inc., formerly Loot Crate, Inc., should have its Chapter 11 bankruptcy case either converted or dismissed, Regions 3 and 9 U.S. trustee Andrew R. Vara said in court documents filed Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

The company has asked for the court’s approval to incur $500,000 in financing to pursue director and officer litigation. Vara filed an objection to this motion and simultaneously filed a cross motion seeking the conversion or dismissal.

The U.S. trustee noted that the debtors have been under Chapter 11 for almost three years without a confirmed plan, and the estates are administratively insolvent, even without including about $2.6 million in unpaid sales tax obligations.

“Despite their administrative insolvency, the debtors want to incur financing – and repay at least 2.2x the amount financed – to pursue speculative director & officer litigation,” Vara said. “Until that litigation is resolved, no plan is confirmable.”

The U.S. trustee said that if the court approves the financing motion, the administratively insolvent cases will incur significantly more debt and linger in Chapter 11 indefinitely.

As such, Vara said the financing motion should be denied, and the cases should be converted or dismissed.

He added that the debtors’ monthly operating reports are 11 months behind, with the most recent one, from May 2021, suggesting that the debtors ran out of cash almost a year ago, despite having over $650,000 in post-petition accounts payable.

The debtors also haven’t paid U.S. trustee fees in over a year, Vara said.

Los Angeles-based Loot Crate sells pop culture subscription boxes. The company filed bankruptcy on Aug. 11, 2019 under Chapter 11 case number 19-11791.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.