In re Hills Stores Co.
United States Bankruptcy Court for the Southern District of New York
137 B.R. 4 (1992)
- Written by Eric Miller, JD
Facts
Hills Stores Co. (Hills) (debtor), a large retailer, went into Chapter 11 bankruptcy and continued to operate as debtor-in-possession. The United States trustee appointed an official creditors’ committee with 15 members, of which 4 represented subordinated debt. The committee was divided into three subcommittees, each of which included subordinated-debtor representation. Nearly a year later, the subordinated bondholders raised previously unspoken objections. The subordinated bondholders argued that their economic interests diverged dramatically from those of the senior and trade creditors, who the subordinated bondholders claimed would receive an early payout. The subordinated bondholders also argued that the committee had failed to investigate potential preference claims and lender-liability actions against the senior creditors, though Hills was engaged in a preference analysis. The subordinated bondholders moved for the appointment of a new official subordinated-bondholder subcommittee or, alternatively, their own committee.
Rule of Law
Issue
Holding and Reasoning (Brozman, J.)
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