New Round Of Objections To SFX Bankruptcy Plan

A half-dozen entities have filed objections to the EDM giant’s post-bankruptcy plan, which grants legal immunity to the company’s employees, provides continued payment to the firms administering its bankruptcy and gives SFX power to reject contracts and agreements without oversight. On Nov. 1, Salesforce.com, Viagogo, Mastercard Europe and Google filed objections to the plan in Delaware bankruptcy court, along with the U.S.

Trustee overseeing the case and the Internal Revenue Service. At issue are “third-party non-debtor releases” – basically a provision that shields past and current employees from liability to any party that has filed a claim in the bankruptcy. While the SFX plan doesn’t name specific individuals, the company seeks to protect all of SFX’s “respective affiliates, related funds, partners, current and former directors, current and former members, current and former officers [and] current and former managers.”

Excluded from that release of liability is former CEO and Chairman Robert Sillerman, general counsel Howard Tytel and former vice chairman Mitchell Slater. All three can still be sued by creditors. That wasn’t enough to satisfy U.S. Trustee Andrew Vara, who said broad releases of liability are generally banned under the bankruptcy code. He also took issue with continued undisclosed payments to entities administering the bankruptcy, like FTI Consulting.

“These fee payments are presumably to be made with no disclosure of the amounts and recipients, and with no legal basis established for the payments,” Vara wrote. “The Court should not, and cannot, abdicate its oversight of professional fees.” Other objections included a demand from the IRS, which is currently owed $125,000 by SFX, that the company file updated tax returns before it be allowed to emerge from bankruptcy.

Ticket reseller Viagogo objected to a provision that gave SFX “an indefinite period” to assume or reject contracts.

“The Debtors should be required to announce their intentions now,” Viagogo attorney Ricardo Palacio wrote. Attorneys for Mastercard Europe also objected to SFX’s timeline for dealing with contracts, calling the provision “an improper leverage tactic” which “effectively holds contractual counterparties hostage to their whims on an indefinite basis.”

The rush of objections have led SFX to ask the court for an extension. The company now says it needs until Dec. 31 to file an amended bankruptcy plan, which would have the company exiting bankruptcy in March.

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