Almost two years after Flying Star filed for bankruptcy protection, its owners have earned creditor approval to move the company forward.
Jean and Mark Bernstein still need a U.S. Bankruptcy Court judge’s order to execute their reorganization plan, but it received a critical endorsement from creditors in a recent vote. Every class of creditors in the Chapter 11 case either actively voted to approve the plan or was deemed to have accepted by not casting ballots, according to a tally report the Bernsteins filed in court this week.
Jean Bernstein and Paul Fish, the attorney representing Flying Star’s unsecured creditors committee, said they expect the plan to get judicial confirmation during a scheduled hearing on Tuesday.
Confirmation will allow the Bernsteins to initiate their plan to keep control of the company by buying all Flying Star equity at auction for at least $2.8 million. The sum will allow them to pay some of Flying Star’s claims — like the legal costs of the bankruptcy process — in full immediately. They will pay off other creditors, like their lenders, in full in monthly installments.
The 100-plus unsecured creditors — which include the likes of food suppliers, a pest control company and PNM — will get an estimated 66 percent of the value of their claims, far more than the Bernsteins’ original proposal to pay them about 21 percent. Unsecured creditors will get most of the payment shortly after the auction, but the rest will come over the next two years.
The court’s confirmation would mark a major milestone for the Bernsteins, who at one point faced a competing bid for the company they started.
There was a creditor-backed plan to sell the company to Southwest Brands, which owns Garduño’s and Keva Juice. But the creditors committee recently withdrew that plan after negotiations that led the Bernsteins to dramatically increase their own bid.
Jean Bernstein said she never doubted she and her husband would retain control.
“I never lost confidence we had the support of our customers, our vendors and our employees,” she said.
But she said getting to this point proved far more “contentious” than she expected, blaming Fish in particular for making it complicated.
“I don’t think (he) … needed to do some of the things he did to get the price for the creditors,” she said. “I think so much could have been achieved in a more efficient and more negotiable environment.”
But Fish defended the work, noting that unsecured creditors are getting more than three times more money under the Bernsteins’ current plan than their original plan.
“If we hadn’t been prepared and fought them tooth and nail, we’d be back a the 20 percent,” he said.