Court sets vote in bankruptcy case - Catholic Courier

Court sets vote in bankruptcy case

Shortly after taking the bench at an April 16 hearing in the Diocese of Rochester’s bankruptcy case, U.S. Bankruptcy Judge Paul R. Warren announced his intention to approve disclosure statements in support of two competing plans of reorganization for the Diocese of Rochester.

After more than four years of negotiations and litigation, the judge’s approval clears the way for diocesan creditors to vote to either accept or reject the plan proposed jointly by the Diocese of Rochester and the Official Committee of Unsecured Creditors — and an alternative plan put forth by diocesan insurer Continental Insurance Company, also known as CNA. Creditors who vote to accept both plans will be asked to indicate which of the two plans they prefer.

During the hearing, Warren and the various parties in the case also agreed to a voting deadline of July 1. If creditors vote to accept either plan, a further hearing to consider confirming (approving) that plan will take place in early September 2024.

If creditors accept both plans, Warren will need to determine which plan provides the best resolution of the bankruptcy case for creditors and the diocese.

Revised documents answered the court’s concerns

The recent hearing was a continuation of a Jan. 30 session during which Warren ordered revisions to the draft disclosure statements prepared by both CNA and the diocese. Among other concerns, Warren said the original documents were not written in easily understood “plain English” and needed to provide more clarity to creditors on the timing and amount of payments they could expect to receive.

The diocese and CNA both submitted revised disclosure statements fixing deficiencies previously noted by the court. On April 16, Warren complimented the work of all parties involved in addressing his prior concerns and noted that the latest revision of the diocesan disclosure statement was “as good as it’s going to get. It’s as ‘plain English’ as you can hope … This (latest revision) got it done. You’ve done what I asked you to do.”

Warren did ask for adjustments to some “boilerplate” language common to both plans and said the changes should take no more than a few days for lawyers to implement. Attorneys representing the various parties also were tasked with filing a proposed joint order approving both disclosure statements, as well as a form of ballot for creditors to use in voting on the plans.

Creditors will vote on plans with key differences

The joint plan proposed by the diocese and creditors’ committee is the result of extensive negotiation among the diocese, the committee and four diocesan insurers — LMI, Underwriters, First State and Interstate — that have agreed to settlement amounts that the creditors’ committee found acceptable.

It calls for the diocese, its parishes and certain affiliates to contribute $55 million to a trust for the compensation of abuse claimants. Combined with a total of $71.35 million from the four settling insurers, the trust would have initial funding of $126.35 million.

However, the joint plan also anticipates that significant additional funding for the trust will be generated by post-confirmation litigation against non-settling insurer CNA.

In contrast, CNA’s plan provides that CNA will contribute $75 million in exchange for a full release from any exposure to post-confirmation litigation. It also assumes that the diocese, parishes and affiliates as well as settling insurers would contribute amounts equivalent to those called for in the joint plan, thereby anticipating total trust funding capped at $201.35 million.

The creditors’ committee, which opposes the CNA plan, has advised the court that it believes CNA has exposure well in excess of the $75 million CNA is proposing to pay.

Both plans call for child-protection provisions

Both plans call for the diocese to commit to child-protection provisions, most of which have long been incorporated in the diocese’s Safe Environment and CASE Training programs.

However, the provisions also call for the diocese to make website modifications and post on-premises signage to heighten awareness of its commitment to safe-environment protocols, and to establish at a local university a public archive of certain abuse-related files.

Concluding the main portion of the April 16 hearing, Warren addressed the many abuse survivors crowded into his courtroom and in a nearby overflow room connected by audio-visual devices. “The local media has been more than unkind about how long this has taken,” he said, pointing out that all parties involved “have gone to an awful lot of effort to get to this point.”

But rushing through the case could have served “to invite a quick appeal, and then we’d lose another year while it sits upstairs (in another court),” he said.

Contains reporting by Mike Latona

Tags: Diocesan Bankruptcy Updates
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