The Committee of Unsecured Creditors has been named for the PacSun Chapter 11 bankruptcy case.
The committee includes:
- Nike USA, a vendor and the largest unsecured creditor with $5.6 million owed
- Simon Property Group, a landlord
- Hurley International, a vendor
- Sedunotex LTD, a clothing manufacturer
- GGP Limited Partnership, a landlord
- WP Glimcher, a landlord
- Charles Pfeiffer, a class action plaintiff
According to the Federal Judicial Center, creditors have a more active role in a Chapter 11 case than in other bankruptcy cases.
The official unsecured creditors’ committee, which is appointed by the U.S. trustee and made up of the seven largest unsecured creditors of the debtor who are willing to serve, monitors the progress of the case.
A secured claim is one that gives the creditor an interest in property as assurance of payment, such as a mortgage on the house to secure a home loan; the holder of an unsecured claim can’t look to any specific property of the debtor for payment.
So the committee negotiates with the debtor to develop a plan that will protect the interests of unsecured creditors, according to the Federal Judicial Center.
Because there is no case trustee in a Chapter 11 case, the committee has the authority to perform investigative functions, such as reviewing the debtor’s assets, liabilities, and financial conduct to determine its ability to continue in business.
In layman’s terms, the committee acts in an adversarial role during the process with the goal of getting the debtor and its backers, in this case, Golden Gate Capital, to pay more money to unsecured creditors.
The committee also typically scrutinizes the debtor-in-possession financing agreement and sometimes looks to see if any preferential payments were made to creditors before the bankruptcy filing.
For a full list of the top 40 unsecured PacSun creditors, see our previous story.
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