Since my April 8th blog post, Curtis James Jackson III, better known as rapper 50 Cent (“Jackson”), filed his proposed First Amended Plan and Disclosure Statement. The deadline for creditors and parties-in-interest to object to Jackson’s Disclosure Statement is April 27th, followed by a May 18th hearing on approval.
Jackson’s Plan proposes to allow Sleek Audio, LLC’s, Suntrust Bank’s, and Lastonia Leviston’s unsecured claims in the amounts of $17,320.67, $3,890,000.00 and $6,000,000.00, respectively. He will be contributing up to $23.4 million in cash over the proposed plan of 5 or less years, and will also contribute up to 70% of the net proceeds from his currently pending malpractice claim. Jackson estimates that general unsecured creditors will receive between 74% and 92% of their allowed claims and each holder of an allowed unsecured claim under $10,000.00 will be paid in full.
What is a disclosure statement?
A disclosure statement is a document that a Chapter 11 debtor or plan proponent files with the Court in conjunction with his proposed plan of reorganization (or liquidation). The disclosure statement must provide “adequate information” to allow creditors to make an informed decision about whether to accept or reject the proposed plan.
The Court has broad discretion to determine whether the disclosure statement provides adequate information and that decision is often made based on the nature, history, and complexity of the finances of the Chapter 11 debtor. Generally, a disclosure statement includes information about the debtor’s financial history, circumstances that resulted in the bankruptcy filing, description and value of the debtor’s assets and the amount and nature of his debts, description of his plan of reorganization and repayment to creditors as compared to a Chapter 7 liquidation.
Why would someone object to a disclosure statement?
Creditors and parties in interest may file an objection on the basis that the plan does not provide sufficient information or analysis which would allow the them to make a decision whether to vote for or against the proposed plan. They may also object to statements in the plan they believe are incorrect. Courts have denied approval of disclosure statements where statements contained there in were unsupported by factual information such that creditors were unable to independently evaluate the merits of the plan.
As to Jackson’s amended disclosure statement, upon a quick review, it appears to be quite comprehensive. Moreover, since he has come to an agreement with his largest unsecured creditors, he may not receive any objections unless the U.S. Trustee’s office or perhaps a secured creditor takes issue with his disclosures. Jackson is closer to the finish line and his happy ending. More to report after April 27th!
Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or firstname.lastname@example.org.