In re Metrocraft Pub. Services, Inc., Bankruptcy No. 83-04811A.

• Decision Date: 14 May 1984
• Docket Number: Bankruptcy No. 83-04811A.
• Citation: 39 BR 567
• Parties: In re METROCRAFT PUBLISHING SERVICES, INC., Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

39 B.R. 567 (1984)

In re METROCRAFT PUBLISHING SERVICES, INC., Debtor.

Bankruptcy No. 83-04811A.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

May 14, 1984.

Anthony DeMarlo, McCurdy & Candler, Decatur, Ga., and Richard B. Herzog, Jr., Bisbee, Parker & Rickertsen, Atlanta, Ga., for debtor.

Paul W. Bonapfel, Cotton, White & Palmer, P.A., Atlanta, Ga., for the Creditors' Committee.

ORDER

W. HOMER DRAKE, Bankruptcy Judge.

This case is before the Court on the application by the above-named debtor for approval of its disclosure statement in accordance with § 1125 of the Bankruptcy Code. An objection to the disclosure statement was filed by the Creditors' Committee ("Committee"). Following a hearing on May 1, 1984, this matter was taken under advisement. As set forth below, the disclosure statement contains a number of deficiencies which must be corrected before the Court will approve the disclosure statement for distribution to creditors.

Section 1125(b) of the Bankruptcy Code states as follows:

An acceptance or rejection of a plan may not be solicited after the commencement of the case under this title from a holder of a claim or interest with respect to such claim or interest, unless, at the time of or before such solicitation, there is transmitted to such holder the plan or a summary of the plan, and a written disclosure statement approved, after notice and a hearing, by the court as containing adequate information. The court may approve a disclosure statement without a valuation of the debtor or an appraisal of the debtor\'s assets.

"Adequate information" is defined in § 1125(a)(1) of the Bankruptcy Code to mean

information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtor\'s books and records, that would enable a hypothetical reasonable investor typical of the holders of claims or interests of the relevant class to make an informed judgment about the plan.

Case law under § 1125 of the Bankruptcy Code has produced a list of factors disclosure of which may be mandatory, under the facts and circumstances of a particular case, to meet the statutory requirement of adequate information. Disclosure of all factors is not necessary in every case. Conversely, the list is not exhaustive, and a case may arise in which disclosure of all these enumerated factors is still not sufficient to provide adequate information for the creditors to evaluate the plan. Nevertheless, these factors provide a useful starting point for the Court's analysis of the adequacy of the disclosure statement. The Court will address the Committee's objections with an eye toward these enumerated factors as they pertain to this debtor's business and the proposed Chapter 11 plan of reorganization.

Factors (1) through (11) are taken from the case of In re A.C. Williams Co., 25 B.R. 173 (Bkrtcy.N.D.Ohio 1982). Factors (12) through (13) and (14) through (15) appear in In re William F. Gable Co., 10 B.R. 248 (Bkrtcy.N.D.W.Va.1981), and In re Adana Mortg. Bankers, Inc., 14 B.R. 29 (Bkrtcy.N.D.Ga.1981), respectively. This Court adds factors (16) through (19) in response to objections raised in the instant proceeding.

Relevant factors for evaluating the adequacy of a disclosure statement may include: (1) the events which led to the filing of a bankruptcy petition; (2) a description of the available assets and their value; (3) the anticipated future of the company; (4) the source of information stated in the disclosure statement; (5) a disclaimer; (6) the present condition of the debtor while in Chapter 11; (7) the scheduled claims; (8) the estimated return to creditors under a Chapter 7 liquidation; (9) the accounting method utilized to produce financial information and the name of the accountants responsible for such information; (10) the future management of the debtor; (11) the Chapter 11 plan or a summary thereof; (12) the estimated administrative expenses, including attorneys' and accountants' fees; (13) the collectibility of accounts receivable; (14) financial information, data, valuations or projections relevant to the creditors' decision to accept or reject the Chapter 11 plan; (15) information relevant to the risks posed to creditors under the plan; (16) the actual or projected realizable value from recovery of preferential or otherwise voidable transfers; (17) litigation likely to arise in a nonbankruptcy context; (18) tax attributes of the debtor; and (19) the relationship of the debtor with affiliates.

The debtor has quoted from this Court's opinion in In re Brandon Mill Farms, Ltd., 37 B.R. 190 (Bkrtcy.N.D.Ga.1984), in defense of the adequacy of the disclosure statement. In In re Brandon Mill Farms, Ltd., 37 B.R. at 192, this Court stated that "the disclosure statement is not intended to be a general discourse in black letter law." The debtor gives that passage sweeping significance which was not intended by the Court.

Brandon Mill Farms involved a Chapter 11 liquidation plan in which the debtor's principal asset was sold with Court approval, and the plan simply proposed to allocate the proceeds among the various classes of creditors. A creditor asserted that the disclosure statement should point out the right of any creditor not paid in full to seek redress against the debtor's general partners. The Court rejected the creditor's assertion on the basis that such a disclosure would be tantamount to giving bare legal advice. Because the debtor did not contemplate continued business operations, the viability of the management was not an issue in evaluating the Chapter 11 plan. Moreover, a lawsuit against the general partners was deemed to have no bearing on the distribution under the Chapter 11 plan. The aforestated passage from Brandon Mill Farms is only applicable in such a limited context. Otherwise, a statement of "black letter law" which affects, inter alia, the creditors' distribution or the feasibility of the plan is not immune from disclosure under Brandon Mill Farms. Having presented the legal background, and having made the necessary disclaimer, the Court proceeds to discuss the particulars of the case sub judice.

The disclosure statement describes the business of the debtor, Metrocraft Publishing Services, Inc. ("Metrocraft"), in the following terms:

Metrocraft is a medium size commercial web printing company with its place of business at 1833 Lawrenceville Highway, Decatur, Georgia. Metrocraft offers to its customers a full spectrum of services from composition and typesetting to complete web offset press. These services, including camera ready preparations and sheet fed presses, are offered as separate services as well as a completely integrated package.

A separate entity, Metropolitan Advertising Associated ("MAA") was created to act as a sales organization to increase Metrocraft's business and, ultimately, to act as a broker to place business with other printers. The disclosure statement indicates that:

In January, 1983, MAA supplied all of its business to Metrocraft. By February MAA was brokering some business, and by March MAA was brokering 80% of its business. The combined business of Metrocraft and the MAA brokering brought in some 26 million impressions, or $650,000.00 gross sales for the quarter ending March 31, 1983.

The disclosure statement points out that two experienced printing sales and marketing individuals left MAA during July, 1983...