Former Rockport, committee settlement draws U.S. trustee objection

By Sarah Lizee

Olympia, Wash., Oct. 23 – RP Co. Liquidating, LLC, formerly Rockport Co., LLC, and its official committee of unsecured creditors’ proposed settlement drew an objection from Regions 3 and 9 U.S. trustee Andrew R. Vara, according to documents filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

Vara said the settlement would result in a case-dispositive distribution to some creditors without the benefit of a confirmed plan.

“The substantive and procedural issues with the proposed settlement are many and would be avoided by the confirmation of a combined plan and disclosure statement under local rule 3017-2, or, if a plan cannot be confirmed, conversion or dismissal,” the U.S. trustee said in the objection.

Vara said the settlement likely would result in a distribution to general unsecured creditors without the payment in full of administrative and priority claims.

The releases proposed by the settlement are broad general releases, releasing all claims that a creditor would have against the released parties, not constrained to claims that are related to the debtors or the bankruptcy cases, and including claims for gross negligence, fraud and bad faith, Vara said.

The settlement also potentially provides materially different consideration to creditors. In addition to the distribution provided, the estates will waive Chapter 5 causes of action against releasing creditors. Those creditors facing significant potential liability will receive greater benefit than creditors who received no avoidable transfers, the U.S. trustee added.

“While the committee urges that the settlement be approved to permit some distribution be made to unsecured creditors, the requirements of the bankruptcy code cannot be ignored,” Vara said.

As previously reported, approval of the settlement agreement will allow for, among other things, the creation of an unsecured creditor reserve in the maximum amount of $500,000 to provide for a distribution to those general unsecured creditors that duly execute the mutual release agreement, and the resolution of potential costly litigation between the parties, the debtors and committee said.

A hearing on the settlement is scheduled for Oct. 25.

Rockport, a West Newton, Mass.-based footwear company, filed its first bankruptcy case on May 14, 2018, and emerged from those proceedings on Dec. 31, 2018. The company filed bankruptcy a second time on June 14 under Chapter 11 case number 23-10774.

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