Law360 (February 17, 2026, 6:48 PM EST) -- Unsecured noteholders for bankrupt label-maker Multi-Color Corp. are suing Barclays Bank PLC as Multi-Color's collateral agent, seeking a declaration that the bank holds liens only on some assets and not "substantially all" assets and property as stated previously in the Chapter 11 case.

Questions over which collateral is actually backing certain liens must be resolved before the case can continue, so that creditors can get an accurate understanding of their potential recoveries, according to the adversary complaint filed Saturday in New Jersey federal bankruptcy court by a cross-holder ad hoc group of hedge funds and investment managers.

A big portion of the debtors' global business — which includes more than 90 facilities, more half of them outside of North America — is not actually collateral for which Barclays holds liens, they argued.

"These are not trivial exclusions," the noteholders said, adding that determining the fair market value of the collateral at stake will be "crucial" to figuring out which of the debtors' assets can be used to satisfy certain claims and how much Multi-Color's projected recoveries in Chapter 11 were "materially overstated" in favor of other creditors served by Barclays.

They also accuse the debtors of repeatedly misstating which assets secure the term loans in both their disclosure statement and first-day declaration — mistakes that are "not marginal" since "major sections of the disclosure statement appear to be untrue and unreliable," they said.

Atlanta, Georgia-based Multi-Color and affiliates hit Chapter 11 last month with an agreement to trim $3.9 billion of its $5.9 billion in debt. The company makes labels for a broad range of automotive, pharmaceutical, beauty, laundry, food and other consumer products.

Multi-Color's debtor-in-possession financing package won interim approval Feb. 2, but only after the amount of money that lenders can roll up was cut in half due to concerns about the value of collateral securing some first-lien claims — concerns brought by the same group of unsecured lenders that sued Barclays.

The noteholders' claims stem from debt issued by LABL Inc., a co-debtor and Multi-Color's parent company, including $690 million of 10.5% senior notes issued in 2019 that are due in 2027. The claims are also tied to 8.25% notes issued in 2021 that are due in 2029, according to the complaint.

The debtors issued billions of additional new debt in 2021, including a $1.86 billion U.S. term loan and a €593 million ($702.9 million at current exchange rates) term loan, for which Barclays serves as administrative and collateral agent under a term loan security agreement that sets out the collateral package supporting claims held by the term loan lenders.

That agreement lists categories of assets that serve as the collateral securing those claims and assets that are explicitly excluded — but both categories of assets at issue were redacted from the complaint.

Under the agreement, liens held by Barclays are actually junior to liens on those same assets that secure a $590 million asset-based lending facility that had also been issued in 2021 — meaning that the U.S. ABL facility claims must be paid first, the complaint says.

Furthermore, because the collateral is limited to specific assets and property, the term loan secured lenders can't say that they have a lien on the debtors' business more broadly — meaning that the rest of the company's assets are unencumbered and should be available to be sold off to fund distributions to unsecured creditors, the noteholders argued.

A lawyer for the defendant did not immediately reply to a request for comment.

The debtor is represented by Steven N. Serajeddini, Rachael M. Bentley, Peter A. Candel, Casey McGushin and Ashley L. Surinak of Kirkland & Ellis LLP, and Michael D. Sirota, Warren A. Usatine and Felice R. Yudkin of Cole Schotz PC.

The cross-holder ad hoc group is represented by Paul R. DeFilippo, James N. Lawlor and Joseph F. Pacelli of Wollmuth Maher & Deutsch LLP, and Bruce Bennett, Benjamin Rosenblum, Genna L. Ghaul, Andrew Butler and Benjamin C. Sandberg of Jones Day.

Barclays is represented by Alan J. Brody of Greenberg Traurig LLP, and Joel Moss, Jordan Wishnew, Amit Trehan, Timothy B. Howell and Matthew Catone of Cahill Gordon & Reindel LLP.

The case is In re: Multi-Color Corp., case number 3:26-bk-10910, in the U.S. Bankruptcy Court for the District of New Jersey.

–Additional reporting by Rick Archer and Vince Sullivan. Editing by Amy French.

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