Bankruptcy Plan Confirmation Challenges: New Value, Vote Changes, Third-Party Guaranties, D&O Selection

Recent Updates on Key Issues for Obtaining Plan Approval or Objecting to a Plan

Recording of a 90-minute CLE webinar with Q&A


Conducted on Tuesday, November 18, 2014

Recorded event now available

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Program Materials

This CLE webinar will discuss recent developments in plan confirmation issues, including whether a plan that offers new value from an insider can be confirmed without an auction process, the effect of third-party guarantees, whether creditor must have “good cause” to change a plan vote, and the selection of directors and officers of reorganized debtor.  The program will discuss the issues from the perspective of both the debtor and creditors, equity holders and other stakeholders.

Description

Practitioners continue to wrestle with the new value exception to the absolute priority rule and what kind of a market test is needed.  The necessity of an auction for new value provided by an insider (who was not an equityholder) was confirmed by the 7th Circuit in the Castleton Plaza case and this issue continues to generate litigation.

The Ninth Circuit Bankruptcy Appellate Panel ruling in Loop 76 LLC that the existence of a personal guarantee may be reason to separately classify a secured lender's deficiency claim was a departure from rulings from other courts, and introduces uncertainty to creditors who are the beneficiaries of personal guarantees.

A bankruptcy court in the Southern District of New York ruled in Momentive Performance that noteholders did not have good cause to change their vote on the debtor's plan.  This case was preceded by a December 2013 case, J.C. Householders Land Trust #1, which denied a vote change to a secured creditor who had purchased an unsecured creditor’s claim after that creditor had voted in favor of the debtor’s plan.

The recent Digerati Technologies case in the U.S. Bankruptcy Court for the Southern District of Texas provides a road map of factors that courts may assess in determining whether the directors and officers to be appointed by the reorganized debtor meets Section 1129(a)(5)(A)(ii)’s requirement that such appointment be "consistent with the interests of creditors and equity holders.”  Case law on this issue is sparse, so this case is instructive. 

Listen as our authoritative panel of bankruptcy practitioners discusses hot topics in plan confirmation, including new value plans, the effect of third-party guarantees on claim classification,  whether a creditor must have “good cause” to change a plan vote, and the selection of directors and officers of reorganized debtor. 

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Outline

  1. New value plans
  2. Effect of third-party guarantees on claim classification
  3. The right to change a plan vote
  4. Selection of directors and officers of reorganized debtors under Section 1129(a)(5)(A)(ii)

Benefits

The panel will review these and other key issues:

  • Whether a plan that offers new value from a non-equityholder insider can be confirmed without an auction process
  • The effect of third-party guarantees on claim classification
  • What constitutes “cause shown” to change a plan vote, particularly where the claim at issue has been transferred
  • The selection of directors and officers of reorganized debtor under Section 1129(a)(5)(A)(ii)

Faculty

Michael E. Foreman
Michael E. Foreman

Partner
ForemanLaw

Mr. Foreman has more than 20 years of financial restructuring and bankruptcy experience, representing secured and...  |  Read More

Michael J. Riela
Michael J. Riela

Shareholder
Vedder Price

Mr. Riela focuses his practice on all aspects of bankruptcy and out-of-court workouts. He acts on behalf of banks,...  |  Read More

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