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Showing 11 posts in Plan Issues.

Insider’s Scoop: Judge Sontchi’s Decision to Confirm Horsehead’s Plan Was One of His Honor’s Most Difficult and Closest Calls in Ten Years on the Bench

In re Horsehead Holding Corp., No. 16-10287 (CSS) (Bankr. D. Del. Sept. 2, 2016) [Transcript Ruling]

Following a three day confirmation trial, which attracted scores of shareholders and running commentary via live tweets from the courtroom, Judge Sontchi confirmed the second amended plan of reorganization (the “Plan”) proposed by Horsehead Holding Corp. and its affiliated debtors (“Horsehead”) over the objection of the official committee of equity holders (the “Equity Committee”), holding that the Plan was proposed in good faith and satisfied the absolute priority rule.  His Honor described the decision as one of the most difficult and closest calls that he has had to make during his time on the bench. Read More ›

Plan Confirmation Principles Not Categorically Applied in the Settlement Context

In re Energy Future Holdings, Corp., No. 15-1591, 2016 WL 2343322 (3d Cir. May 4, 2016)

The Third Circuit recently determined that a settlement in the form of a tender offer did not violate the Bankruptcy Code and was within the Bankruptcy Court’s discretion to approve.  In its ruling, the Court examined whether principles applicable to a plan of reorganization, such as the “equal treatment” rule embodied in 11 U.S.C. § 1123(a)(4), must be categorically applied in the settlement context, and found there is no such requirement.  Nonetheless, the Court affirmed the lower courts’ ruling on the grounds that the settlement in this case provided equal treatment to creditors. Read More ›

Non-Consensual Third Party Releases Certified Directly to the Third Circuit

In re Millennium Lab Holdings II, LLC, No. 15-12284 (LSS), 2016 WL 155500 (Bankr. D. Del. Jan. 12, 2016)

[Update - Despite the Bankruptcy Court's ruling, the Third Circuit Court of Appeals denied the petition for direct certification in an order issued February 24, 2016.  The appeal will now head to the Delaware District Court.]

The Delaware Bankruptcy Court has granted direct certification of a hot-button issue surrounding confirmation of plans in bankruptcy to the Third Circuit Court of Appeals—namely, whether a bankruptcy court has the authority to release a non-debtor’s direct clams against other non-debtors without the consent of the releasing non-debtor. Read More ›

On the Eve of the EFH Confirmation Hearing, Bankruptcy Court Issues Opinion on Unsecured Noteholders’ Entitlement to Post-Petition Interest

In re Energy Future Holdings Corp., No. 14-10979, --- B.R. ----, 2015 WL 6660787 (Bankr. D. Del. Oct. 30, 2015)

On the eve of the multi-week confirmation hearing scheduled in the chapter 11 cases of Energy Future Holdings Corp., Judge Sontchi of Delaware’s Bankruptcy Court issued several significant decisions, one of which—analyzed here—rules on whether unsecured creditors are entitled to receive post-petition interest on their claims under four sections of the Bankruptcy Code—section 502(b)(2), section 1129(a)(7) (“Best Interests Test”), section 1129(b) (“Cramdown”), and section 1124(1) (“Unimpairment”).*  First, as a threshold matter, the Court held that an allowable portion of an unsecured claim cannot include post-petition interest under the plain language of section 502(b)(2).  Second, the Court analyzed whether payment of post-petition interest on an allowed unsecured claim is required for a chapter 11 debtor to confirm a plan of reorganization and, if so, at what rate.  In sum, the Court held that:  (1) to satisfy the Best Interests Test, an unsecured creditor must receive post-petition interest at the Federal judgment rate only if it would be entitled to such a distribution in a hypothetical chapter 7 liquidation; (2) to properly Cramdown an unsecured rejecting class, the plain language of section 1129(b)(2) does not require the payment of post-petition interest but a court may award such payment if equitable, at either the contract rate or such other appropriate rate; and finally (3) Unimpairment may occur without the payment in cash of post-petition interest at the contract rate but such determination must be made by a court on the facts of the case and pursuant to the court’s equitable power. Read More ›

Delaware Bankruptcy Court Holds That Discharge Does Not Affect Additional Insured’s Rights to Pursue Indemnification Against Debtors’ Insurer

In re SelectBuild Illinios, LLC, Case No. 09-12085 (KJC), 2015 WL 3452542 (Bankr. D. Del. May 28, 2015)

The Delaware Bankruptcy Court recently denied a Motion to Enforce a Permanent Injunction against a contract counterparty, The Ryland Group, Inc. d/b/a Ryland Homes (“Ryland”), and held that Ryland could seek indemnification as an additional insured from the Reorganized Debtors’ insurer, ACE American Insurance Company (“ACE”). Read More ›

Third Circuit Approves of Structured Dismissals That Deviate From the Bankruptcy Code’s Priority Scheme – But Only in Rare Cases

Official Comm. of Unsecured Creditors v. CIT Group/Business Credit, Inc. (In re Jevic Holding Corp.), No. 14-1465, 2015 WL 2403443 (3d Cir. May 21, 2015)

The Third Circuit Court of Appeals (the “Third Circuit”) answered a novel question of bankruptcy law in the affirmative—whether a chapter 11 case can ever be resolved in a “structured dismissal” (a disposition that winds up the bankruptcy with certain conditions attached instead of simply dismissing the case and restoring the status quo ante) that deviates from the priority scheme of the Bankruptcy Code.  In rare cases, the Bankruptcy Code “permits a structured dismissal, even one that deviates from the [section] 507 priorities, when a bankruptcy judge makes sound findings of fact that the traditional routes out of Chapter 11 are unavailable and that a settlement is the best feasible way of serving the interests of the estate and its creditors.”  The Third Circuit found that this was one of those rare cases. Read More ›

EFH Debtors’ First Lien Settlement and Related Tender Offer Upheld by District Court

Delaware Trust Co. v. Energy Future Immediate Holdings, LLC (In re Energy Future Holding Corp.), No. 14-723 (RGA) (D. Del. Feb. 19, 2015)

Energy Future Holding Corporation and its subsidiaries (the “Debtors”) commenced their chapter 11 proceedings with a series of settlements (together, the “Global Settlement”) reached with certain key creditor constituencies.  Although the Global Settlement was later withdrawn in large part, the Debtors sought and obtained Bankruptcy Court approval of their settlement (“First Lien Settlement”) reached with the $4 billion first lien noteholders of debtor Energy Future Intermediate Holdings, LLC.  Pursuant to the First Lien Settlement, a tender offer was proposed in order to exchange the first lien notes (comprised of approximately $3.5 billion of 10% notes due 2020 and approximately $500 million of 6 7/8% notes due 2017) for new debt obligations to be issued under the Debtors’ postpetition DIP facility.  Premiums were to be placed on the noteholders’ outstanding principal (5%) and accrued interest (1%).  In exchange, the noteholders would release all claims related to existing make-whole litigation. Read More ›

Sword of Damocles Trumped By Finality in Confirmation Order

In re East West Resort Development V, L.P., L.L.L.P., No. 10-10452 (BLS), 2014 WL 4537500 (Bankr. D. Del. Sept. 12, 2014)

On April 23, 2013, the Delaware Bankruptcy Court reopened the bankruptcy case of reorganized debtor Northstar Iron Horse, LLC (“Iron Horse”) in order to consider a creditor’s request for a Rule 2004 examination of Iron Horse and two other affiliated reorganized debtors. The request related to the creditor’s attempt to augment the distribution it received on account of its claim pursuant to the confirmed plan by recovering the proceeds of a post-confirmation settlement reached between Iron Horse and its insurance company, ACE American Insurance Company (“ACE”).  In this Opinion, Judge Shannon denied the Rule 2004 motions as futile, finding that the confirmed plan prevented further recovery and that the period to challenge the confirmation order long since expired. Read More ›

Third Circuit Affirms Confirmation of Plan with Reasonable Classification Scheme and Secured Creditor’s Right to Vote Subordinated Debt

In re Coastal Broadcasting Sys., Inc., 2014 WL 2808260 (3d Cir. June 23, 2014)

On June 23, 2014, the Third Circuit Court of Appeals issued an Opinion affirming the Delaware District Court’s decision to affirm confirmation of a chapter 11 plan of reorganization.  In doing so, the Court upheld the enforceability of a voting assignment in a subordination agreement that arose from a pre-petition out-of-court restructuring. Read More ›

Debtors’ Funds Purchased in Section 363 Sale Permitted to be Disbursed to Debtors' Administrative and Unsecured Creditors Over IRS Objections

United States v. LCI Holding Co., Inc., Nos. 13-924 (SLR), 13-1188 (SLR), 2014 WL 975145 (D. Del. March 10, 2014)

On March 10, 2014, Judge Sue L. Robinson of the District Court denied the request of the United States, on behalf of the Internal Revenue Service, to stay disbursement of funds placed into escrow by a purchaser of debtor-assets intended to satisfy some but not all administrative and unsecured claims asserted against the debtors.   Simply put, the sale was appropriate under section 363 of the Bankruptcy Code and the escrowed funds were not property of the debtors' estates. Read More ›