Rowe objects to case conversion, argues creditors would miss out on $120,000 under Chapter 7

By Caroline Salls

Pittsburgh, Oct. 12 - Rowe Cos. objected to the U.S. Trustee's motion to convert the company's Chapter 11 case to Chapter 7 bankruptcy for liquidation, arguing that the conversion would cost priority and general unsecured creditors their scheduled distributions, according to a Friday filing with the U.S. Bankruptcy Court for the Eastern District of Virginia.

The company said its plan of reorganization calls for American Communications to receive 100% of the new common stock in the reorganized company in exchange for a $180,000 payment, with some of the payment to be used to fund a liquidating trust for creditor distributions.

If the case is converted to Chapter 7, Rowe said American Communications would not pay $120,000 of its contribution, and, as a result, holders of priority claims and general unsecured claims would receive no distribution.

In addition, the company said holders of administrative claims would only receive a fraction of their scheduled distribution if the case is converted.

"The United States Trustee has not and cannot articulate a rational basis for turning a blind eye to the additional $120,000 in consideration that will be paid under the reorganization plan, and that could not and would not be paid in a Chapter 7 case," the company said in the objection.

"It appears that the United States Trustee desires that Chapter 11 administrative claims go unpaid and that priority and general unsecured creditors receive nothing."

As previously reported, U.S. Trustee W. Clarkson McDow Jr. said in his motion that the case should be converted because the company has no chance of rehabilitation.

McDow said Rowe is no longer operating and it has no cash.

Although the company has said it believes creditors will do better in Chapter 11 because a proposed $120,000 new stock payment would not be made in Chapter 7 bankruptcy, McDow said there is no guarantee that creditors will actually receive the $120,000 because it is possible that the new stock payment funds could be consumed by liquidating trust professional expenses.

A hearing on the case conversion is scheduled for Oct. 19.

Rowe, a McLean, Va.-based furniture company, filed for bankruptcy on Sept. 18, 2006. Its Chapter 11 case number is 06-11142.

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