The bankruptcy court in the Diamond Comic Distributors bankruptcy case has approved hiring litigation attorneys and borrowing from JPMorgan Chase to pay them, despite the objections to the plan filed by Alliance Entertainment and the Ad Hoc Committee of Consignors. The objections had argued that the strategy will run up administrative costs for uncertain results, and that any benefits will go only to the bank, not to unsecured creditors (see “Consignors, Alliance Object”).
JPMorgan Chase is already owed around $7 million as the secured DIP lender, so the additional $766,000 it has agreed to loan to the estate is a bet that the litigation will bring back more (see “Diamond Trustee Lawyers Up”). There are three main sets of litigation: against Alliance Entertainment (in which an $8 million purchase deposit is at stake); against the publishers whose nearly $50 million in consignment inventory is in a Sparkle Pop warehouse in Mississippi; and against any insiders paid in the year prior to the filing or any companies paid in the 90 days prior to the filing, if they received unfair preferences.
The only trustee motion that was denied as a result of the hearing on Monday was a motion on procedures for payment of professionals, which presumably will be re-filed with changes.
Source: ICv2
