In re Cardinal Congregate I

Retirement-home owner Cardinal Congregate I (CCI) (debtor) filed for Chapter 11 bankruptcy. CCI filed a proposed reorganization plan with the bankruptcy court along with the statutorily required disclosure statement to creditors. Although affiliates of CCI’s general partner had made loans and provided services to CCI, the disclosure statement did not identify the affiliates or give detailed information about the affiliates’ claims. Regarding CCI’s postpetition operations and expected future business, the disclosure statement referred creditors to monthly operating reports filed with the bankruptcy court and attached only non-detailed pro forma income calculations. The disclosure statement did not (1) explain the accounting and valuation methods used to prepare the disclosure statement; (2) explain how the proposed “net cash flow” to be used as a source of funds for the reorganization was to be defined or calculated; (3) give detailed information about a proposed sale or refinancing of the retirement-home facility that could be used as another source of funding for the reorganization; (4) include a detailed estimate of allowable administrative expenses; or (5) identify or discuss causes of action that CCI planned to pursue under the Bankruptcy Code or other law. Several of CCI’s creditors opposed the bankruptcy court’s approval of the disclosure statement, asserting that disapproval was appropriate because (1) CCI’s reorganization plan was not confirmable, making approval a waste of time and resources, and (2) the disclosure statement did not contain the quantity and quality of information required by 11 U.S.C. § 1125.