DBSI trustee, unsecured creditors committee file plan of liquidation

By Caroline Salls

Pittsburgh, June 24 - DBSI Inc.'s official committee of unsecured creditors and Chapter 11 trustee filed a joint plan of liquidation for the company Thursday with the U.S. Bankruptcy Court for the District of Delaware.

Under the plan, non-litigation assets will be allocated to two different trusts, including a DBSI liquidating trust for the benefit of the creditors of the DBSI consolidated debtors and a DBSI real estate liquidating trust for the benefit of the creditors of note/fund consolidated debtors.

According to the plan, the DBSI consolidated debtors were generally involved in the tenant-in-common operations and investments in technology corporations, and the note/fund consolidated debtors issued various debt and equity interests through private placements for the purpose of investing in various real estate and other ventures.

In addition, a DBSI estate litigations trust will be formed to hold estate causes of action, and a private actions trust will be formed to hold non-estate causes of action.

The liquidating trusts will be the beneficiaries of the litigation trusts.

Holders of general unsecured claims will receive beneficial trust interests, which entitle them to a share of the trust assets.

The funding of the trusts will allow unsecured creditors to operate and prosecute litigation claims.

Treatment of creditors will include:

• Holders of administrative and priority claims will be paid in full in cash;

• Holders of miscellaneous secured claims will either have their claims reinstated, paid in cash or paid through the transfer of assets securing the claims;

• Holders of general unsecured claims and unsecured note claims will receive a share of liquidating trust interests, entitling them to a share of distributable cash; and

• Holders of subordinated claims and interests will receive no distribution.

Company plan

As previously reported, DBSI filed a plan of liquidation in May 2009. However, the committee objected to that plan and was granted the right to file a competing plan after Aug. 4, 2009.

Under the company's plan:

• Holders of administrative claims, priority tax claims and priority claims would recover 100% in cash;

• Holders of miscellaneous secured claims would recover 100% either in cash, through reinstatement of the claim or through the return of the collateral securing the claim;

• Holders of unsecured claims would receive a share of liquidating trusts beneficial interests, which would entitle them to a share of net distributable cash; and

• Holders of subordinated claims and interests in DBSI would receive no distribution under the plan.

Meridian, Idaho-based DBSI controls a network of real estate entities. The company filed for bankruptcy on Nov. 10, 2008. Its Chapter 11 case number is 08-12687.

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