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< Return to Firm News ST&G Wins Bigger Payout for O'Sullivan Industries Creditors March 16, 2006 In October 2005, O'Sullivan Industries, Inc. and its affiliates ("O'Sullivan") filed a pre-negotiated plan of reorganization that, if confirmed, would have wiped out all general unsecured creditors and handed the reorganized company over to O'Sullivan's senior secured creditors.
ST&G appeared at four days of first day hearings, arguing that the general unsecured creditors were not out of the money, were entitled to time and information to prove their case, and were entitled to a distribution. The Official Committee of Unsecured Creditors for O'Sullivan then decided to retain ST&G, which challenged the efforts of O'Sullivan and the secured creditors to "fast track" their plan to confirmation. Through its extensive analysis of O'Sullivan's financial affairs, and its development of novel and aggressive legal theories, ST&G demonstrated that, rather than being wiped out, general unsecured creditors were entitled to millions of dollars.
ST&G promptly commenced discovery efforts relating to O'Sullivan's proposed disclosure statement, and also filed a lawsuit against the senior secured creditors challenging the scope of their asserted liens and the value of their collateral. Ultimately, O'Sullivan and the senior secured creditors engaged in settlement negotiations that resulted in plan modifications providing for a recovery of 9% to 17% for general unsecured creditors, and a distribution to the subordinated bondholders of warrants for approximating 10% of the reorganized company. The modified plan, which was confirmed on March 16, 2006, validated ST&G's advocacy. Even though the senior secured creditors received less than payment in full, the confirmed plan, rather than wiping out general unsecured creditors as envisioned by the plan that was pre-negotiated by the debtor and its secured creditors, provided general unsecured creditors with a meaningful recovery on their claims.
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