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Showing 2 posts in Recharacterization.

Equitable Subordination Relief Granted; Recharacterization Relief Denied

U.S. v. State Street Bank and Trust Co., as Trustee for Junior Subordinated Secured PIK Notes, et al. (In re Scott Cable Communications, Inc.), Adv. Proc. No. 01-4605 (KJC), 2014 WL 5298031 (Bankr. D. Del. Oct. 15, 2014).

This recent and lengthy 90-page Opinion by the Honorable Kevin J. Carey arises from the chapter 11 proceedings of Scott Cable Communications, Inc. (“Scott Cable” or the “Company”) and concerns an adversary complaint in which the United States of America, on behalf of the Internal Revenue Service (the “Government” or the “IRS”), sought to recharacterize or equitably subordinate certain secured notes issued in 1996 as part of a chapter 11 reorganization plan.  The secured notes were issued to two classes of creditors and known as “Series A Junior PIK Notes” and “Series B Junior PIK Notes.”  Pursuant to the Order, the Government’s request to recharacterize the Series A Junior PIK Notes as preferred equity instruments of Scott Cable was denied, but the Government’s request to equitably subordinate the Series A Junior PIK Notes to the administrative claims of federal and state taxing authorities was granted.  The Government’s request to recharacterize or equitably subordinate the Series B Junior PIK Notes was denied. Read More ›

Derivative Standing to Pursue Recharacterization, Equitable Subordination, and Breach of Fiduciary Duty Claims on behalf of Debtors Optim Energy, LLC Denied by Bankruptcy Court

In re Optim Energy, LLC, No. 14-10262 (BLS), 2014 WL 1924908 (Bankr. D.  Del. May 13, 2014)

On May 13, 2014, the Honorable Brendan L. Shannon issued an Opinion denying an unsecured creditor’s request for derivative standing to pursue claims on behalf of debtor Optim Energy, LLC (“Optim Energy”) and its affiliated debtors (collectively, the “Debtors”) for recharacterization, equitable subordination, and breach of fiduciary duties against direct and indirect non-debtor owners, ECJV Holdings, LLC (“ECJV”) and Cascade Investments, L.L.C. (“Cascade”).  Walnut Creek Mining Company (“Walnut Creek”), the Debtors’ largest non-insider general unsecured creditor, alleged that the insiders engaged in a scheme that transformed them from 100% equity holders to senior secured lenders holding claims in excess of $700 million secured by first priority liens on substantially all of the Debtors’ assets. Read More ›