Rockley Photonics’ plan releases draw objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., Feb. 24 – Rockley Photonics Holdings Ltd.’s Chapter 11 plan drew an objection from Region 2 U.S. trustee William K. Harrington, according to documents filed Thursday with the U.S. Bankruptcy Court for the Southern District of New York.

Harrington said the plan imposes third-party releases on parties who haven’t affirmatively and unambiguously demonstrated their consent to grant the releases.

He also said the definitions of “released parties” and “related party” is unusually broad, encompassing many creditor groups and holders of interest far exceeding the scope typically authorized in confirming a plan.

The U.S. trustee is also concerned that classes 1, 2 and 5 are treated as unimpaired claimants, not entitled to vote and deemed to accept the plan, and are forced to release claims they may have against the debtor’s current and former directors, managers, officers, financial advisers and attorneys.

“The debtor does not justify the reason the classes 1, 2 and 5 are classified as ‘unimpaired’ despite the fact the legal rights of each member of these classes will be altered by requiring them to provide non-consensual third-party releases,” he said in his objection.

“Likewise, the debtor does not explain what, if anything is being provided in return for the non-consensual releases and why the debtor believes this court has jurisdiction to order the non-consensual release of the claims of creditors against non-debtors.”

Harrington also objects to the scope of the injunction and exculpation provisions of the plan in connection with recoupment and contribution on creditors who didn’t have a right to vote on the plan.

A combined hearing on confirmation of the plan and approval of the disclosure statement is scheduled for March 3.

Cheshire, U.K.-based Rockley Photonics specializes in the research and development of integrated silicon photonics chipsets. The company filed bankruptcy on Jan. 23 under Chapter 11 case number 23-10081.

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