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Prague – On Monday, the High Court in Prague annulled the approval of the reorganization plan of the bankrupt company Arca Investments. According to the court, the plan discriminates against some creditors and has other defects. The court announced this in a press release today. The reorganization plan was approved last July by the Municipal Court in Prague after the approval of the majority of the company's creditors. However, part of the creditors appealed against the verdict. The Municipal Court will have to decide on the plan again based on the decision of the Court of Appeal. Creditors of Arca Investments filed claims for roughly 23 billion crowns in insolvency proceedings. Insolvency proceedings are also conducted with the company in Slovakia.
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In the Czech part of the proceedings, according to the reorganization plan, 100 percent of secured creditor's claims, 31.48 percent of unsecured creditors' claims and 9.6 percent of group creditors' claims were to be satisfied. The debtor's shareholders were to receive nothing. “The appeals panel found defects in the reorganization plan consisting of illegal discrimination against some creditors who, despite their objections, were included in the group of creditors with a lower satisfaction ratio and who filed an appeal against the decision of the court of first instance,” Kateřina Kolářová, spokeswoman for the High Court in Prague, said today.
The Court of Appeal also agrees with the doubts of some creditors about the honesty of the reorganization plan. According to the court, it is possible that due to the lack of some important accounting documents, the plan does not accurately reflect the economic and legal possibilities of the debtor. “The valuation of his assets was neither accurate nor up-to-date, and thus a contradiction arose between the promised amount of the proposed satisfaction of unsecured creditors and the debtor's documented economic possibilities – the value of his assets,” said the court spokeswoman.
“The reorganization plan does not convincingly demonstrate the achievement of the expected objectives of the reorganization, i.e. the satisfaction of the creditors to the extent offered, while the risks of the presented reorganization plan, which the insolvency administrator draws attention to and which the expert institute also admits, are not satisfactorily addressed,” the Supreme Court described the defects of the reorganization plan. According to the appeals court, the revocation of the previous approval of the plan should now allow Arca Investments to remove the defects and add missing and updated information to the plan, which would then be voted on again by the creditors.
“It is now up to the debtor to possibly adapted these requirements and modified the reorganization plan,” Arca Investments insolvency administrator Lee Louda told ČTK. If they do, everything has to be discussed again in the usual 'round', including calling a meeting of creditors to vote on its approval again. It will then be up to the creditors to decide on the modified reorganization plan. “The above-described will take at least three quarters of a year, including re-decisions by the court and decisions on possible appeals,” he estimated.
Arca Investments was the parent company of the Arca Capital financial group. The reorganization plan for the Czech part of the bankrupt company was prepared for Arca by consultants from PwC and Dentons. He was supposed to bring creditors about six billion crowns. Part of the claims registered in the insolvency proceedings were not recognized.
