Woodbridge Committee Formation Meeting Scheduled for 12/14/17

Woodbridge Group of Companies, LLC, a Sherman Oaks, California-based real estate finance and development company, has filed for Chapter 11 protection in Delaware.  The committee formation meeting is scheduled for December 14, 2017 at 10:00 a.m. at the Doubletree Hotel in Wilmington, Delaware.

The company says it intends to file a plan to substantially reduce its debt and transition its real estate investment business to institutional financing sources. It hopes to reorganize and successfully emerge as a profitable real estate investment before the end of 2018.

Additional information is available here.

Mette K.

 

Procedures for Filing Bankruptcy Claims Changed Today! Read. Learn. Be Prepared.

Details matter.  After years of procedural wrangling, significant changes to the federal procedural rules take effect today.  While the changes are focused principally on streamlining procedures in consumer cases, they include provisions – such as a requirement that secured creditors file proofs of claim – that impact all cases.  Here’s a run through of some key points.  You can find the full text of the amendments here.

Proofs of Claims: Secured Creditors Beware!

  • Secured creditors must now file proofs of claim to have their claims allowed. Although in accordance with Section 506(d), if they don’t, their liens will not be rendered void for only that reason. FRBP 3002(a).

Claim Objections: Who to Serve, Whether to Have a Hearing, Where to Object

  • To object to a claim, you must serve the affected creditor by 1st class mail directed to the name and address on its filed claim form.
  • The Court no longer needs to schedule or hold a hearing on every claim objection.
  • Any party-in-interest may seek a determination of the amount and priority of any claim. Plan proponents in Chapter 12 and 13 may now include these objections in the body of a Plan.  FRBP 3007 & 3012.

Objecting to Liens or Transfers? File a Motion or Put It in a Chapter 13 Plan

  • Parties may now seek to avoid a lien or other transfer of the debtor’s exempt property by motion or in the debtor’s Chapter 13 Plan. FRBP 3012 & 4003(d).

Claim Bar Dates: Time It Right in Chapter 7, 12, and 13

  • Filing a claim in a voluntary Chapter 7 (liquidation), 12 (family farmer), or 13 (individual debt readjustment) case?  You must now file your claim within 70 days after the bankruptcy petition filing date.  For involuntary Chapter 7 cases, you have until 90-days after the order for relief is entered. FRBP 3002.
  • If a case converts to Chapter 7 or 13, the new, 70-day period will run from the date of the order converting the case. If it converts to Chapter 7, a new claims filing deadline starts running.  FRBP 3002.
  • The Court may extend these deadlines if the debtor has not filed a complete list of creditors. FRBP 3002(c)(6).
  • And a new 2-stage deadline is created for filing mortgage claims secured by an interest in the debtor’s principal residence. FRBP 3002(c)(7).

Chapter 13 Plans & Confirmation: Use the Form, Know Your Deadlines

  • An “official,” standardized Chapter 13 plan is created… unless your jurisdiction has adopted its own (consistent) local form.  FRBP 3015(c).
  • A debtor must provide creditors with at least 21 days’ notice of the deadline for objecting to Chapter 13 Plans and 28 days’ notice of the confirmation hearing in Chapter 13 cases. FRBP 2002(a)(9) and (b)(3).

Mette K.

Good News for Committees… Standard Carve Out Provisions Do Not Limit Fee Awards

Over and over again the same story plays out.  A case files.  A lender carves-out a small amount from its collateral to fund Committee professionals and an investigation of the lender’s position.  That amount is inadequate, and the Committee blows past the carve-out amount.

That’s just what happened in Molycorp, where the DIP financing agreement contained a typical $250,000 carve-out provision for the Committee’s investigation of claims.

 After an extensive discovery process resulting in asserted claims, mediation, and a global settlement, the court confirmed a consensual plan and the Committee’s counsel requested payment of $8.5 million in fees.

The lender objected, arguing that the $250,000 carve-out was an absolute cap on fee payments.  The Committee responded that while the carve-out may have limited its fees in an administratively insolvent case, it was irrelevant in a case with a confirmed chapter 11 plan.  The Delaware court agreed.

The court explained that “[t]he carve-out is . . . an agreement by the secured creditor to subordinate its liens and claims to certain allowed administrative expenses, permitting such professionals’ fees to come first in terms of payment from the estate’s assets. . . .  [W]hen there are insufficient unencumbered assets to pay professionals’ fees and no plan has been confirmed, professionals’ only recourse is the carve-out.”

Here, however, a plan was confirmed. In that context, Bankruptcy Code section 1129(a)(9)(A) requires that allowed administrative claims be paid in cash (or as otherwise agreed) on the plan’s effective date.  And nothing in the carve-out language suggested that the fee cap would prohibit the allowance of administrative fees upon plan confirmation.

“If the secured parties desire confirmation, the administration claims must be paid in full in cash at confirmation even it if means invading their collateral.”

A World of Caution….

 The court contrasted the carve-out at issue with one in a DIP financing order entered in another case that stated: “[n]otwithstanding anything to the contrary therein, and absent further Order of the Court, (i) in no event during the course of the Chapter 11 Cases will actual payments in respect of the aggregate fees and expenses of all professional persons retained pursuant to an Order of the Court by the Creditor’s Committee exceed $450,000 in the aggregate (the ‘Creditors’ Committee Expense Cap’) … (iii) any and all claims (A) incurred by the Creditor’s Committee in excess of the Creditor’s Committee Expense Cap or (B) incurred by any professional persons or any party on account of professional fees and expenses that exceed the applicable amounts set forth in the Budget shall not constitute an allowed administrative expense claim for purposes of section 1129(a)(9)(A) of the Bankruptcy Code.”  At the same time, the court offered “no opinion as to whether it would approve a DIP order containing [such] provisions” had it been presented ….

See In re Molycorp, Inc., 562 B.R. 67 (Bankr. D. Del. 2017).

 

BCBG Creditors’ Committee Organizational Meeting: March 9, 2017

Shortly before midnight on February 28, 2017, BCBG Max Azria Global Holdings, LLC and affiliates filed for Chapter 11 bankruptcy protection in the Southern District of New York. The United States Trustee has scheduled a meeting to form an unsecured creditors’ committee on March 9, 2017 in New York.

Store Closings and “Right Sizing”

The Bankruptcy Court has entered an interim order authorizing store closing sales at 120 BCBG locations, predominantly retail and factory stores. Each of the stores to be closed has historically operated at a loss. Collectively, the stores generated $10.3 million in losses in 2016, representing 63% of BCBG’s total losses from stores with a negative contribution margin. BCBG estimates the store closings will generate $20.1 million.  The liquidation sales commenced before the bankruptcy filing and are expected to continue through the end of April. It appears that, at least in the short term, about 50 of BCBG’s stores will remain open, together with a significant number of its partner shops located inside major department stores.

A Bankruptcy Sale…. Maybe?

BCBG has also filed a draft plan with a “toggle” feature, allowing for either (a) the sale of BCBG’s assets to a third party; or (b) a debt for equity conversion on terms to be negotiated.

BCBG says that it has begun marketing its assets, and it has filed a motion to approve bidding procedures. The motion includes a request to allow BCBG to provide a stalking horse bidder-if one is found-with break-up fees and expense reimbursements.  The proposed procedures, if approved, would require potential bidders to submit preliminary bid documents to BCBG and its investment banker, Jeffries, in order to receive due diligence information. They would also require interested bidders to provide non-binding indications of interest by March 30, 2017, with an auction tentatively to follow by May 22, 2017.  But the procedures proposed by BCBG and its lenders also grant them wide latitude to move forward, instead, with a debt for equity conversion… the terms of which have yet to be negotiated.

More Information

Additional information about the case, including a list of stores scheduled to be closed and the company’s proposed sale procedures and plan, can be found on the website maintained by BCBG’s claim agent, Donlin Recano.

 

Golfsmith Proposes $1 Million Employee Retention Program

Golfsmith has asked the Delaware Bankruptcy Court to approve a $1 million retention program for some of its key employees.  The retention program, it says, is needed to implement its recently approved bankruptcy sale and to complete the wind down of its remaining business. The plan, if approved, will provide retention bonuses so some 127 non-insider employees.

The motion [Docket #483] is available for download here.