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≡ “BLATANTLY DISCRIMINATORY” ≡
A no-holds-barred reply and objection from the more than 100 unsecured creditors of Grand Slam Track on Friday asked the U.S. Bankruptcy Court in Delaware to throw out a proposed plan to pay athletes about 85% of what they are owed and less than 1.5% to almost everyone else. It started with:
“The Plan (as defined below), as proposed, is not confirmable on its face because it violates the fundamental bedrock tenet of the Bankruptcy Code of treating similarly situated creditors equally and contains a coercive death trap provision if either class of creditors does not approve the Plan.
“In fact, through the Plan, Winners [Alliance], in partnership with Debtor’s senior management, are attempting to preserve their reputations among athletes at the expense of all other creditors. Winners does this by proposing to fund an blatantly discriminatory Plan with no business purpose. For Winners, this is a continuation of its bad faith conduct, commenced long before this case was filed.
“Winners apparent distain [sic] for ordinary trade creditors, who supported this company since its inception, is only rivaled by their contempt for the Bankruptcy Code’s requirement of treating similarly situated creditors equally.
“Rather than articulate a business purpose, outline a coherent vision or demonstrate how the reorganized Debtor would operate, the Plan only serves one purpose: to communicate to the world that Winners wants to take care of athletes, at the expense of everyone else. However, reality reveals a much different story.”
The filing goes on to cast Winners itself as a central actor in the financial failure of the Grand Slam Track project:
● “Winners, while cloaking itself as a white knight savior of the Debtor, is actually one of, if not the, primary reason the Debtor has failed. As will be detailed in a forthcoming draft complaint that the Committee [of Unsecured Creditors] will be seeking standing to pursue, Winners is not an innocent bystander or simple investor in the Debtor.
“Rather, Winners orchestrated the Debtor’s every step from before the Debtor was even incorporated. The Committee’s investigation to date into the Debtor has identified shocking levels of incompetence, bad faith, self-dealing and failures to fulfill its fiduciary duty by the Debtor’s management and Winners as well as a failure to provide the committed financing promised to the Debtor and communicated to the broader trade community.”
● “The proposed Plan is the final step for Winners to make the athletes close to whole while trying to bury all of the bad conduct under the rug. To add insult to injury, the Debtor attempts to blame its failures at the feet of the innocent trade creditors who supported the business throughout and have not been paid.
“For their troubles, Winners and the Debtor offered trade creditors with an estimate $13 million in claims a projected 1.50% distribution from a pool of $200,000, a small fraction of what the Debtor has allocated to the Debtor’s professionals in this case, and an even smaller fraction of what has been paid to the athletes prior to the case or the approximately $6 million offered to the athletes in the Plan.”
● “At the end of the day, the Plan is nothing more than a disguised Bankruptcy Rule 9019 settlement among insiders where the settlement proceeds are earmarked for a select group of favored creditors.”
The filing notes its future action against Winners, asking the Court to dismiss any plan to settle the Grand Slam Track debts in the meantime:
“[I]t is important to understand that the Debtor has been under the control of Winners from before the Debtor was even formed. As will be detailed in the Committee’s forthcoming motion seeking standing to prosecute estate causes of action, Winners has unabashedly repeatedly directed the Debtor to ignore the valid claims of its trade vendors and prefer the athletes while at the same time failing to live up to its financing commitments.
“The Committee anticipates actively litigating significant and valuable claims against Winners, the Debtor’s Board, including its former directors, and Mr. [Michael] Johnson. Meanwhile, the Plan contemplates burying these valuable claims and causes of action by simply re-vesting the claims in the Reorganized Debtor, which will remain under Winners thumb after its debts have been discharged.”
The filing runs through a series of legal objections to the plan as offered, primarily on its unequal treatment of creditors and states:
“In the absence of a viable business plan, the Plan is simply a mechanism for Winners to ensure that their preferred athletes and vendors receive a near total recovery while shielding any estate claims from being prosecuted against them. This is the epitome of bad faith.”
The next scheduled hearing is on 12 March, for the court to consider the proposed reorganization plan, with the unsecured creditors asking for the plan to be thrown out now and a new, fairer plan to be created.
¶
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