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Chapter 11 Plans

Everybody knows that the dice are loaded:  reclamation rights are illusory in bankruptcy cases.  Where a supplier ships goods to a company that later files for bankruptcy, section 546(c) of the Bankruptcy Code provides reclamation remedies (i.e., supplier getting the goods back) under certain circumstances (there are time limits, etc.) if the supplier has such rights under state law (e.g., Uniform Commercial Code section 2-702). But most corporate debtors have a secured creditor in place with liens on all property of the debtor, including inventory and proceeds thereof.  And most […]

A written tour of business bankruptcy and its alternatives We started this series (click here to start reading from the beginning) with a broad overview of business bankruptcy but our last several installments have focused on one small, albeit important, aspect- the automatic stay.  We’ve heard from a number of readers that they would like to read more about the proverbial forest, rather than just the automatic stay tree.  And, so, with this installment we pan the camera back to explain a concept that is at play throughout a bankruptcy […]

A written tour of business bankruptcy and its alternatives Our last installment focused on what we called the “mundane” middle of a chapter 11 case. You can read it here. This time we discuss something a bit more exciting: confirmation. Summary Chronology Here is the basic chronology leading up to confirming a plan, for those of you with a short attention span or a need for immediate gratification: Debtor files the bankruptcy petition Debtor negotiates a plan with creditors (or their agents) Debtor drafts a plan and its disclosure statement Debtor […]

A written tour of business bankruptcy and its alternatives In case you are hopping on board the bus in the middle of our tour, you may want to know that this installment looks at some of the more mundane stuff that happens after a Chapter 11 case is filed but before the end of the case.  We will discuss that in later installments. Before we let you out of the bus to look around at this stop, let’s review what we’ve already seen (and what you may want to go […]

A written tour of business bankruptcy and its alternatives Companies in chapter 11 typically consider (or at least should consider) other options before ending up there. In fact, distressed businesses tend to follow a fairly predictable pattern, or lifecycle: denial, anger, bargaining, depression, and acceptance- – – No, those are the five stages of grief. In all seriousness, understanding how to cope with, counsel, or live through a distressed businesses situation is easier if you understand the typical lifecycle. You can think about the lifecycle of a chapter 11 debtor […]

A written tour of business bankruptcy and its alternatives In order to understand the options a financially distressed business (or its owners, creditors, or potential buyers) has, one has to understand the Bankruptcy Code. The Bankruptcy Code is contained in Title 11 of the U.S. Code and is divided into chapters. Chapters 1, 3 and 5 are “general” chapters, applicable in all cases: Chapter 1 contains definitions, defines who can be a debtor, describes the courts’ powers, and contains some other general rules. Chapter 3 governs “case administration,” which sounds […]

A written tour of business bankruptcy and its alternatives You manage a private equity or hedge fund. Or maybe you work for a family office. Or maybe you’re the CEO or CFO of a business that has a competitor that is failing and you are considering trying to buy it on the cheap. Or perhaps you are the general counsel of a company that does business with a company that just filed for bankruptcy or that is being sued for a preference. Or maybe you are a business owner considering […]

JPMorgan Chase & Co. and others (“JPM”) lent $1.5 billion to General Motors Corporation (“Old GM”) under a term loan agreement (the “Term Loan Agreement”).  JPM was the senior secured creditor of Old GM.  Old Gm went into chapter 11 bankruptcy.  Under the terms of the DIP financing approved by the bankruptcy court, proceeds of the DIP loan were used to pay $1.5 billion to JPM for its claims under the Term Loan Agreement.  The unsecured creditors committee formed in the Old GM chapter 11 case (the “Committee”) wants that […]

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