Rochester Drug: U.S. trustee says disclosure statement lacks information

By Sarah Lizee

Olympia, Wash., Jan. 12 – Rochester Drug Cooperative, Inc.’s disclosure statement drew an objection from Region 2 U.S. trustee William K. Harrington, according to a Tuesday filing with the U.S. Bankruptcy Court for the Western District of New York.

Harrington said the disclosure statement should contain additional information explaining why the plan treats two different classes as unimpaired despite the fact that under the plan the legal rights of each such class’ members may be altered.

“Simply put, although the debtor lists classes 1a and 1b as unimpaired, both classes are deemed to consent to third-party releases unless they separately opt out,” he said.

He also said additional information should be provided in the disclosure statement to explain why creditors that vote to reject or abstain from voting on the plan are deemed to consent to third-party releases unless they separately opt out.

The disclosure statement also fails to fully articulate the reasons and under what legal theory it proposes to award a hey employee incentive plan, chief executive officer incentive payments and a key employee retention plan that have not been approved by the court, Harrington said.

“In fact, according to the debtor’s monthly operating reports, the debtor has already made these bonus payments without court authorization,” the U.S. trustee said.

The company is a Rochester, N.Y.-based health care distributor. It filed bankruptcy on March 12, 2020 under Chapter 11 case number 20-20230.

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