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Date of Issue: October 05, 2006

GSR creditors agree, disagree on management structure

The court-approved unsecured creditors committee in the GSR Development bankruptcy case has generally agreed with a motion by GSR attorney Richard Prosser to appoint a restructuring manager for the company, but with one notable exception: GSR principals Robert Byrne and Steve Noriega must get the boot from management.

Prosser filed a motion in federal court Sept. 25 for authority to have GSR hire accountant William Maloney as its chief restructuring manager.

Under the motion, Maloney would be paid $325 per hour and a "success" fee of $125,000, which would be paid only if Maloney's "plan of reorganization is confirmed" by the court and the unsecured creditors are paid in full.

Creditors committee attorney John Anthony agreed with the motion, stating that the committee "enthusiastically agrees" with GSR's assessment on the need for "impartial and experienced crisis management to replace principals Robert Byrne and Steve Noriega and to operate independently."

While that all sounds like a bonus for the unsecured creditors that have an estimated $5.3 million in claims against GSR, Anthony did have some reservations. The motion to appoint Maloney does not remove Byrne and Noriega from the management team.

"The continuation of the principals as management (for GSR) would not be acceptable to the committee," Anthony said.

Retaining qualified professionals to "serve at the direction" of Byrne and Noriega is "only a slight improvement" over no professional management, he maintained.