The future claimants’ representative and the Coalition of Abused Scouts for Justice filed a joint objection today to the debtors’ third motion
to extend the exclusive periods to file and solicit a plan of reorganization. Continue reading as our Americas Middle Market team analyzes the Boy Scouts of Americas debtors 3rd exclusivity motion and Request a Trial for access to our coverage of thousands of other stressed/distressed debt situations as well as access to the linked documents.
The overarching basis for the exclusivity objection is the FCR/Coalition’s displeasure with the debtors’ proposed plan
, which they say could “set a record for both the highest number and highest percentage of tort victims to vote down a chapter 11 plan,” estimating that over 95% of holders of direct abuse claims will vote against the plan. The FCR/Coalition say that “the time has come for a different approach” and that they and the official committee of tort claimants are discussing a competing plan
that will “save the Boy Scouts, provide meaningful compensation to survivors, and provide an opportunity for Local Councils and Chartered Organizations to make contributions and become Protected Parties.”
The FCR/Coalition characterize the debtors’ plan as “dead” and say that any attempt to solicit votes on the current plan would be a “colossal waste of estate assets, further reducing assets available for survivors.”
The FCR/Coalition take issue with what they call the debtors’ “unconscionable” settlement
with Hartford Accident and Indemnity Co., First State Insurance Co., Twin City Fire Insurance Co. and Navigators Specialty Insurance Co., or Hartford. The FCR/Coalition also oppose plan provisions limiting the liability of insurers under the applicable policies and vow to fight any plan that incorporates the Hartford settlement and insurance provisions.
The FCR/Coalition attack the reported $650 million settlement with Hartford, calling it an “illusion” because of a settlement reduction clause linked to the ultimate value of the debtors’ settlement with Century Indemnity Co. and the debtors’ alleged failure to diligence Chubb’s possible coverage obligations in connection with direct abuse claims, which the FCR/Coalition believe Chubb may share with Century. While Chubb allegedly has sufficient assets to pay such claims, Century’s assets are limited.
Factoring in the reduction clause and Century’s inability to cover assets without a contribution from Chubb, the FCR/Coalition project the Hartford settlement’s “face value” at $280.5 million
, an amount they characterize as “far outside the range of reasonableness” and an “insult to survivors” given the existing estimate of potential liability for direct abuse claims in the billions.
The FCR/Coalition also oppose any provisions in the plan that would limit insurers’ coverage obligation “solely on the basis of its insured’s limited assets,” which they ascribe to a joint effort between the debtors and their insurers to “escape their coverage obligations through the happenstance of the insured’s bankruptcy.” The FCR/Coalition argue that the insurers’ obligations should be based on the total damages owed by the insured to the victims instead of an “arbitrarily discounted amount,” and that to confirm the plan, the bankruptcy court must find that “survivors are being paid in full or close thereto.”