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Falcon Products creditor objects to plan confirmation amid alleged misconduct
By Caroline Salls
Pittsburgh, Sept. 21 - Falcon Products, Inc. creditor Riverside Claims, LLC objected to confirmation of Falcon's plan of reorganization, according to a Tuesday filing with the U.S. Bankruptcy Court for the Eastern District of Missouri.
As a result of what it called "certain conduct that the co-proponents of the plan may have engaged in," Riverside said the plan goes against the notion of good faith contained in the bankruptcy code.
In the objection, Riverside questioned a $60 million advance to the company from OCM Principal Opportunities Fund II, LP (together with Oaktree Capital Management, LLC), for which Oaktree received warrants to purchase a 15.8% equity interest in Falcon.
According to the objection, soon after Oaktree received the warrants, its debt was paid in full as part of a refinancing transaction, and, on that same day, Falcon's auditors resigned.
Riverside also questioned whether Whippoorwill Associates Inc. was negotiating a restructuring term sheet for Falcon's plan - which could have exposed it to material non-public information about Falcon - at the same time that it was in the public markets purchasing bonds.
Riverside also alleges that Oaktree may have been aware of Whippoorwill's conduct.
According to Riverside, there is no indication that the company has investigated any of this alleged misconduct, and therefore the plan should not be confirmed.
A plan confirmation hearing is scheduled for Oct. 6.
Falcon, a St. Louis manufacturer of commercial furniture, made a prepackaged filing for Chapter 11 on Jan. 31, 2005. Its case number is 05-41108.
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