Chapter 7 bankruptcy trustee Kenneth Silverman continues to pursue financial claims against several former clients of Interep. But he has now reached a settlement with Interep founder Ralph Guild, his son Marc and other former members of the rep company’s board of directors.
Silverman had sued Ralph Guild, Marc Guild, Les Goldberg (now deceased), Howard Brenner, George Pine, John Palmer, Arnie Semsky, Arnold Sheiffer, Terry Bate and David Kennedy, seeking at least $20 million from the former Interep directors and/or executives for alleged “breach of fiduciary duty and waste and mismanagement” of Interep and its various subsidiaries.
Ralph Guild, meanwhile, filed claims against the Interep bankruptcy estate for more than $10.2 million under his termination agreement. Marc Guild filed claims for nearly $3 million under his termination agreement. Together, father and son also filed claims for nearly $7 million for administrative expense claims which h they claimed Interep was obliged to pay.
After what Silverman told the court were “months of arms-length negotiations” with the Guilds, the other former directors and the insurance carrier which wrote a $5 million policy to protect the Interep board, the trustee reached a settlement which he estimates will give the bankruptcy estate approximately #2.25 million in net cash to distribute to Interep’s general unsecured creditors. Those general unsecured creditors had previously received less than $290K, while the priority unsecured creditors had been fully paid out of $1.65 million distributed to them and to cover administrative expenses. All of those distributions were made in April of this year; more than three years after Interep filed Chapter 11 in March 2008. That was converted to Chapter 7 liquidation in October 2008.
Under the settlement agreement XL Specialty Insurance Company will pay $3 million to the trustee in settlement of all claims. From that the trustee will pay $750K to the Guilds in settlement of any and all claims that Ralph and Marc Guild may have against Interep’s bankruptcy estate.
In seeking the judge’s approval of the settlement, the trustee noted the costs of fighting the Guilds in court, plus the fact that the insurer would be paying for their legal costs and further deplete the amount available for payment under the policy even if the trustee won in court. So he said in the filing that the deal “represents a fair and reasonable settlement.”
RBR-TVBR observation: By definition you are fighting over a well-gnawed bone when a company is in Chapter 7 liquidation. Prolonged litigation would likely have left nothing for either side.
So, the Guilds get something and the general unsecured creditors will receive another cash distribution – in fact, a bigger one than they got back in the spring.