Times Square Crowne Plaza’s plan draws objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., March 14 – Times Square JV LLC’s Chapter 11 plan of reorganization drew an objection from Region 2 U.S. trustee William K. Harrington, according to documents filed Tuesday with the U.S. Bankruptcy Court for the Southern District of New York.

Harrington said that, for the sake of efficiency and to avoid the need for a possible re-solicitation, he had raised some, but not all, of his objections to the plan’s non-debtor third-party releases at the disclosure statement hearing.

Though the court overruled the objection for purposes of approving the disclosure statement, the court reserved decision on whether the releases are consensual.

However, after the hearing, the U.S. trustee and debtors discussed his concerns over an aspect of the solicitation process.

Harrington said he believes the debtors will be filing an amended plan that will create a new class 6 to include the roughly 600 individual deposit claimholders who are entitled to vote.

Under the amended plan, only those class 6 creditors who voted to accept the plan will be bound by the non-debtor third-party releases in the same manner as the creditors in classes 1a, 1b and 1c, and 2a, 2b and 2c.

Based on draft tabulations results provided to the U.S. trustee, only 60 creditors, or 6%, of the nearly 1,000 creditors entitled to vote returned ballots.

In addition to the objections raised at the disclosure statement hearing, Harrington said he objects to the scope of the releases as overly broad, including the waiver of all future claims based upon facts unknown at confirmation.

The releases also provide a full and complete escape from liability if the released parties relied on the advice of counsel.

“Although advice of counsel properly may be asserted as a defense to a claim, it is not an affirmative right that may be included as part of the releases where no claim has yet to be asserted,” the U.S. trustee said.

Lastly, the U.S. trustee said he objects to the exculpation and limitation of liability provision, which provides overly broad discharges and limits the liability to people who have had no connection with the cases, for acts that have yet to occur and for which none has provided consideration to the debtors or their estates.

The confirmation hearing is scheduled for March 16.

Times Square JV owns the Crowne Plaza hotel in Times Square in New York. The company filed Chapter 11 bankruptcy on Dec. 28 under case filing number 22-11715.

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