Fourth Amended Disclosure Statement for the Second Amended Chapter 11 Plan of Reorganization Dated September 25, 2015, Proposed by the Archdiocese of Milwaukee
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IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF WISCONSIN In re: Case No. 11-20059-svk ARCHDIOCESE OF MILWAUKEE, Chapter 11 Debtor. Hon. Susan V. Kelley FOURTH AMENDED DISCLOSURE STATEMENT FOR THE SECOND AMENDED CHAPTER 11 PLAN OF REORGANIZATION DATED SEPTEMBER 25, 2015, PROPOSED BY THE ARCHDIOCESE OF MILWAUKEE The Archdiocese of Milwaukee, debtor and debtor-in-possession (the “Archdiocese” or “Debtor”) provides this Disclosure Statement for the Second Amended Plan of Reorganization Dated September 25, 2015, Proposed by the Archdiocese of Milwaukee (the “Amended Plan”). This Disclosure Statement updates the Third Amended Disclosure Statement filed on August 24, 2015, which updated the Disclosure Statement approved by the Court on May 28, 2014. A copy of the Amended Plan accompanies this Disclosure Statement as Exhibit A.1 This Disclosure Statement is presented to certain holders of Claims and Interests to satisfy the requirements of § 1125 of the United States Bankruptcy Code, 11 U.S.C. §§ 101-1330 (the “Bankruptcy Code”). Section 1125 of the Bankruptcy Code requires a disclosure statement to provide information sufficient to enable a hypothetical and reasonable investor, typical of the Debtor’s creditors, to make an informed judgment whether to accept or reject the Amended Plan. This Disclosure Statement may not be relied upon for any purpose other than that described above, and use of this Disclosure Statement for any other purpose is not authorized. THIS DISCLOSURE STATEMENT AND THE AMENDED PLAN ARE AN INTEGRAL PACKAGE, AND THEY MUST BE CONSIDERED TOGETHER FOR THE READER TO BE ADEQUATELY INFORMED. NO REPRESENTATIONS CONCERNING THE ARCHDIOCESE, INCLUDING THE VALUE OF ITS PROPERTY, ARE AUTHORIZED BY THE ARCHDIOCESE OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT. 1 Capitalized terms set forth herein have the meaning assigned to such terms in the Amended Plan unless otherwise indicated. Daryl L. Diesing Bruce G. Arnold Francis H. LoCoco Lindsey M. Greenawald Whyte Hirschboeck Dudek S.C. 555 East Wells Street, Suite 1900 Milwaukee, WI 53202-4894 Telephone: (414) 273-2100 Facsimile: (414) 223-5000 Case 11-20059-svk Doc 3258 Filed 09/25/15 Page 1 of 100 INDUCEMENTS MADE TO SECURE YOUR ACCEPTANCE OF THE AMENDED PLAN, OTHER THAN AS CONTAINED IN THIS DISCLOSURE STATEMENT, SHOULD NOT BE RELIED UPON BY YOU IN ARRIVING AT YOUR DECISION, AND SUCH ADDITIONAL INDUCEMENTS SHOULD BE REPORTED TO COUNSEL FOR THE ARCHDIOCESE, WHO SHALL IN TURN DELIVER SUCH INFORMATION TO THE BANKRUPTCY COURT FOR SUCH ACTION AS MAY BE APPROPRIATE. THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING EXHIBITS CONCERNING THE FINANCIAL CONDITION OF THE ARCHDIOCESE AND OTHER INFORMATION CONTAINED HEREIN, HAS NOT BEEN SUBJECT TO AUDIT OR INDEPENDENT REVIEW EXCEPT AS SPECIFICALLY SET FORTH HEREIN. ACCORDINGLY, ALTHOUGH EVERY EFFORT HAS BEEN MADE TO BE ACCURATE, THE ARCHDIOCESE IS UNABLE TO WARRANT OR REPRESENT THAT THE INFORMATION CONCERNING THE ARCHDIOCESE OR ITS FINANCIAL CONDITION IS ACCURATE OR COMPLETE. BECAUSE OF THE UNCERTAINTY AND RISK FACTORS INVOLVED, THE ARCHDIOCESE’S ACTUAL RESULTS MAY NOT BE AS PROJECTED HEREIN. THE STATEMENTS MADE IN THIS DISCLOSURE STATEMENT ARE MADE AS OF THE DATE HEREOF, PROVIDED THAT HISTORICAL FINANCIAL INFORMATION IS REPORTED AS OF JUNE 30, 2015, UNLESS ANOTHER TIME IS SPECIFIED. THE DELIVERY OF THIS DISCLOSURE STATEMENT SHALL NOT UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY, NOR HAVE ANY SUCH BODIES PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. THIS DISCLOSURE STATEMENT CONTAINS ONLY A SUMMARY OF THE AMENDED PLAN. EACH CREDITOR IS URGED TO REVIEW THE AMENDED PLAN PRIOR TO VOTING ON IT. THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS SUPPORTS THE AMENDED PLAN AND RECOMMENDS THAT CREDITORS VOTE TO ACCEPT THE AMENDED PLAN. This Disclosure Statement was filed on September 25, 2015. The Bankruptcy Court held a hearing on the adequacy of the information set forth in this Disclosure Statement on September 30, 2015. On [---], the Bankruptcy Court approved the Disclosure Statement. The Bankruptcy Court will hold a hearing on confirmation of the Amended Plan beginning on November 9, 2015 at 9 a.m. (Central Time), in Room 167 of the United States Courthouse, 517 East Wisconsin Avenue, Milwaukee, Wisconsin, and continuing on succeeding days as determined by the Court. At that time, the Bankruptcy Court will review a ballot report concerning votes cast for WHD/11875673.1 Case 11-20059-svk Doc 3258 Filed 09/25/15 Page 2 of 100 acceptance or rejection of the Amended Plan, along with objections to the confirmation of the Amended Plan and other evidence and arguments from parties in interest and will determine whether the Amended Plan is in the best interests of the Creditors. To obtain, at your cost, additional copies of this Disclosure Statement please contact: Lindsey Greenawald Whyte Hirschboeck Dudek S.C. 555 East Wells Street, Suite 1900 Milwaukee, WI 53202-3819 (866) 682-2255 [email protected] WHD/11875673.1 Case 11-20059-svk Doc 3258 Filed 09/25/15 Page 3 of 100 TABLE OF CONTENTS I. OVERVIEW OF PLAN AND TREATMENT OF CLAIMS............................................10 II. BACKGROUND OF THE DEBTOR AND THE CHAPTER 11 CASE..........................16 A. Description of the Archdiocese ..............................................................................16 B. Legal Structure of the Archdiocese and the Parishes .............................................17 C. Religious Orders ....................................................................................................18 D. Juridic Persons and Property Ownership ...............................................................18 E. The Clergy Sex Abuse Crisis and the Archdiocese’s Response ............................19 F. Procedures Followed When Abuse is Reported.....................................................23 G. Success of the Archdiocese’s Implementation of Procedures to Protect Children From Sexual Abuse .................................................................................24 H. Purpose and Goals of the Chapter 11 Filing ..........................................................25 III. OPERATIONS OF THE DEBTOR ...................................................................................26 A. Annual Revenue .....................................................................................................26 B. Annual Operating Expenditures .............................................................................27 IV. ASSETS OF THE DEBTOR .............................................................................................28 A. Real Property. ........................................................................................................29 1. Undeveloped Land .....................................................................................29 2. Property In Use for Religious Purposes .....................................................29 3. Property Leased to Others ..........................................................................29 4. Cemetery Properties in Active Use ............................................................30 5. Leasehold Interests.....................................................................................30 B. Personal Property ...................................................................................................30 1. Insurance Settlements ................................................................................31 Case 11-20059-svk Doc 3258 Filed 09/25/15 Page 4 of 100 2. Life Insurance Policies ...............................................................................31 3. Cash............................................................................................................31 4. Additional Personal Property .....................................................................31 5. Accounts Receivable ..................................................................................32 C. Beneficial Interest in Cemetery Perpetual Care Trust ...........................................32 D. Other Unavailable Assets .......................................................................................32 V. THE CHAPTER 11 CASE ................................................................................................33 A. Forensic Investigation of Financial Records and Operating Expenses by Committee’s Financial Advisor .............................................................................34 B. Litigation during the Chapter 11 Case ...................................................................34 1. Determining the Legally Enforceable Claims ............................................34 2. Determining The Major Assets Available for Distribution .......................37 C. Document Publication ............................................................................................42 D. Other Matters .........................................................................................................43 1. Mediation ...................................................................................................43 2. Future Claims Representative ....................................................................43