Thu 01/27/2022 13:35 PM
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Ascena Retail Bankruptcy Update:

Relevant Documents:
Agenda
Motion

At a status conference today in the Ascena Retail debtors’ cases, Judge Frank Santoro and the parties discussed the debtors’ motion (previewed at last week’s conference and filed Wednesday evening, Jan. 26) seeking an order modifying and reconfirming the debtors’ plan of liquidation. The proposed modifications would strike the third-party releases severed by the Virginia district court earlier this month and revise the exculpation provision in accordance with the district court’s opinion. The motion is scheduled for hearing on March 3 at 2 p.m. ET with an objection deadline of Feb. 24.

Debtors’ counsel Steven Serajeddini of Kirkland & Ellis outlined the requested relief for the court, explaining that certain aspects of the proposed order remain subject to ongoing discussions with key parties, including the U.S. Trustee, the lead securities plaintiffs (who appealed confirmation alongside the UST) and Bluestar Alliance, the purchaser of the debtors’ Justice brand assets. Bradford Sandler of Pachulski, counsel to the official committee of unsecured creditors and GUC trustee, said that the UCC supports and is a “co-movant” under the motion.

Serajeddini highlighted the motion’s request that upon entry of the proposed order, the plan be deemed confirmed as of the original Feb. 25, 2021, confirmation date and effective as of the original March 5, 2021, effective date. He also explained that the order would authorize and ratify all actions taken on behalf of the estates in reliance on the original confirmation order. According to the motion, such actions include appointment of the plan administrator and GUC trustee, reconciling and disallowing claims, distributions to creditors and other corporate actions.

Serajeddini added that the proposed order modifies the exculpation provision in a manner consistent with the district court’s opinion by limiting the definition of “exculpated parties” to estate fiduciaries and adding a “gatekeeper provision.” According to the motion, the gatekeeper provision “provides that parties must first obtain approval of the Bankruptcy Court to determine whether a colorable claim against an Exculpated Party exists, and if so, whether a party is authorized by the Bankruptcy Court to bring such claim against an Exculpated Party” (emphasis added).

Serajeddini also explained that although the debtors believe that the plan modifications do not entitle any party to change their vote, parties who voted on the original plan will have the opportunity to assert such a right through an objection to the motion. The debtors preserve their right to contest any such assertion, he added.

Kathryn Montgomery on behalf of the UST said that her office is continuing to evaluate the request that the new confirmation order relates back to the original confirmation and effective dates. Montgomery expressed reservations on the same topic at the Jan. 20 status conference, saying that the UST had not yet “studied [the] issue.”

Andrew Behlmann of Lowenstein for the securities plaintiffs and Alessandra Glorioso of Dorsey & Whitney for Bluestar Alliance each reported that the debtors have incorporated most of their comments to the order but that they are continuing discussions with the debtors regarding certain limited open items not described at today’s hearing.

Judge Santoro raised the district court’s order related to professional fees that was issued in connection with the Jan. 13 opinion and order remanding the case. That order directed that “with respect to any further petitions for approval of attorneys’ fees, the Bankruptcy Court shall submit proposed findings of fact and conclusions of law to the District Court,” which would review the fee requests. Judge Santoro asked the parties to confer and come back with a proposal on how the order should be implemented, observing that the manner of its enforcement may have implications for the debtors’ request that the new confirmation order relates back to the original confirmation and effective dates.
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