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About ABI

Public Companies and Claims Trading Committee Meeting Minutes

2006 Annual Spring Meeting

On Friday, April 21, during the ABI’s 24th Annual Spring Meeting in Washington, DC, a joint meeting was held by the Business Reorganization, Public Companies & Claims Trading, and Financial Advisors Committees.

The meeting began with an introduction of the committee co-chairs:

Public Companies & Claims Trading:   

Glenn Siegel
Dechert
New York, NY

Geoffrey Groshong
Miller Nash LLP
Seattle, WA

Financial Advisors:       

David M. Powlen
Mesirow Financial Consulting, LLC
New York, NY

Rebecca A. Roof
AlixPartners LLC
New York, NY

Business Reorganization:

Jo Ann J. Brighton (New Co- Chair)
Kennedy Covington Lobdell & Hickman
Charlotte, NC

Bradley Sharp
Development Specialists, Inc.
Los Angeles, CA

It was announced that Bob Keach of Bernstein, Shur, Sawyer & Nelson, PA in Portland, Maine, co-chair of the Business Reorganization committee is moving on within the ABI.    Jo Ann Brighton of Kennedy Covington Lobdell & Hickman L.L.P in Charlotte, NC, will become the new co-chair of the Business Reorganization committee.

After the introductions, the committees attended a panel presentation titled The Power of Information:  Who Gets What and How Can They Use It?  The paneldiscussion focused on dissemination and control of information during a chapter 11 case. The panelists were William Weintraub of Pachulski, Stang, Ziehl, Young, Jones & Weintraub P.C. in New York, and Daniel Golden of Akin Gump Strauss Hauer & Feld LLP also from New York The panel was moderated by Bradley Sharp of Development Specialists, Inc. in Los Angeles, one of the co-chairs of the Business Reorganization committee.

The panel discussed a wide range of issues but focused on the intent of the new code section 1102(b)(3) and its practical implications.  The panel essentially agreed that most new cases are looking to establish communication protocols to limit the sharing of sensitive information. 

The panel also discussed, but did not reach agreement, on the efficacy of trading walls and the appropriateness of committee members trading in securities of the debtor.

The committees would like to thank the panelists and all in attendance for an interesting and informative presentation.

2005 Winter Leadership Conference

Committee Co-chairs:

Glenn Siegel
Dechert, LLP

Geoffrey Groshong
Miller Nash LLP

The Public Companies & Claims Trading Committee sponsored a panel discussion entitled “Going Private: What Does It Mean and Should the Public-Company Debtor Do It?” which weighed the pros and cons of public companies deregistering under the Securities and Exchange Act of 1934 upon emergence from chapter 11.

Panel moderators included committee member and newsletter editor Andrea J. Pincus, a senior member of the Bankruptcy & Restructuring Group of Anderson Kill & Olick PC, Gloria J. Frank, a senior member of the Business Law Group of Anderson Kill & Olick PC, Robert L. Hockett, co-founder and managing partner of Covalent Partners LLC and Sandra W. Lavigna, Senior Bankruptcy Counsel Pacific Regional Office U.S. Securities and Exchange Commission.

The panel noted that the issue of deregistering public company debtors – so they emerge as private, non-reporting entities – has come up increasingly in many cases over the last several years driven in part by the onerous costs of ongoing public reporting and the heightened obligations of directors arising under Sarbanes Oxley. The panel noted that negotiations among the various constituencies in a chapter 11 case concerning deregistration involve weighing various business and economic factors and extensive discussion about how to proceed in the event "going private" wins out. The panel provided a road map through the process, touching on (1) "why" – the key business and economic factors that militate in favor of deregistration; (2) "how" – the interplay between Bankruptcy Code §1145 exemptions from the securities laws and the securities rules and regulations that govern how a company with publicly-traded securities can deregister upon emerging from bankruptcy, and (3) "key drafting issues" – elements and structures of chapter 11 plan documents, corporate charter documents and shareholder agreements, in order to "go private" and stay private without triggering renewed public-reporting requirements and the attendant costs.

2004 Winter Leadership Conference

Thomas Moers Mayer of Kramer Levin Naftalis & Frankel LLP  will be discussing claims trading issues.  The issues will include whether claims trading freezes are ever economically justified.  Tom and Chaim T. Fortgang are authors of a seminal work in the claims trading area, Trading Claims and Taking Control of Corporations in Chapter 11,  12 Cardozo L. Rev. 1 (1990).  Tom has also written a paper Liquidity, Disclosure and their Enemies:  Securities Issues and Freezes in Chapter 11  which presents a thesis that restrictions on claims trading for publicly held companies to preserve net operating losses under the Internal Revenue Code are almost never economically justified.

2004 Annual Spring Meeting

A combined meeting between the Public Companies Committee and Unsecured Trade Creditor Committee was highlighted by a presentation concerning claims-buying and selling. The outstanding panel presenting what was officially entitled "Cutting-edge Business and Legal Issues Concerning Buying and Selling of Trade Receivables and Distressed Non-Public Paper" included Andrew I. Silfen of the Arent Fox Firm, with Matthew A. Gold of Argo Partners undertaking the position of the claims buyer and Joseph E. Myers, CCE of the Clear Thinking Group Inc., relating his experience as a "claim seller."

The presentation was followed by a brief committee meeting. Committee Member Bruce Nathan suggested that the committee renew its efforts to take advantage of a committee listserve for sharing ideas, issues and unpublished opinions. A summary explanation of how to access and utilize the listserve is being reviewed and will be distributed in a few weeks. Co-chairs Doug Fox, Deborah Thorne and Berry Spears are presently discussing the compilation of a committee meeting presentation for the Winter Leadership Conference in December 2004 in Scottsdale, Ariz. Please contact one of them if you have any suggestions.

2002 Winter Leadership Conference

The Committee on Public Companies and Claims Trading of the ABI met at 3:45 p.m. on Dec. 6, 2002, during the 2002 Winter Leadership Conference in Tucson, Ariz. The meeting was co-chaired by Glenn Siegel and Geoffrey Groshong.

The first matter discussed was the status of the Committee's Claims Trading Publication project. Three of the committee's articles are being published in the Winter 2002 edition of the ABI Law Review. Additional articles on claims trading will be published in future editions of the Law Review. The committee's goal, when all the needed articles are completed, is to create a handbook on claims trading for publication. The committee could still use more authors for the claims trading publication project.

Glenn Siegel led a discussion of current developments, in the following areas:

1. Indentures.

A. Rights of Holders Before Default

Allan Lange, et al. v. Citibank N.A., et al., 2002 WL 2005728 (Del. Ch.); In re Allied Riser Communications Corp., 283 B.R. 420. Pierre Foods, news article in The Cincinnati Enquirer by Mike Boyer dated Nov. 19, 2002; article from the Dow Jones Capital Markets Report by Michael C. Barr dated Nov. 20, 2002, and news article in Reuters English News Service by Dena Aubin dated Nov. 21, 2002. Boland v. Indah Kiat Finance (IV) Mauritius Limited, et al., 2002 WL 31393899 (N.Y. 2d).

B. Enforcement of Rights Post-petition

Stratosphere Litigation L.L.C. v. Grand Casinos Inc., 298 F.3d 1137.

C. Trustee Liability

LNC Investments Inc., et al. v. National Westminster Bank N.J., et al., 2002 WL 31318026 (2nd Cir. (N.Y.)); Bluebird Partners L.P. v. First Fidelity Bank N.A., et al., 746 N.Y. 2d 475.

D. Voting Rights of Holders

In re Shilo Inn, 2002 WL 31481078 (Mass. Super.).

E. Subordination

Bergson Ice Cream and Food Shops Inc. v. Newberg LP, et al., 183 Or. App. 116, 50 P.3d 1282; SFB Corp. v. Cambridge Automatic Inc., 2002 WL 31481078 (Mass. Super.).

2. Deepening Insolvency.

A. Article in Boston Business Journal for Nov. 15, 2002, by Andrew Z. Schwartz and Jessica M. Silbey: Deepening-insolvency theory is attractive, but no panacea.

B. James W. Schacht vs. Isadore Brown, et al., 711 F.2d 1343.

C. In re Hechinger Investment Co. of Delaware, 280 B.R. 90.

3. Trading restrictions on bank debt.

A. Article from IINews Website, Loan Market Watch, dated June 23, 2002, by Molly Jackson Sell: "Icahn Fires Bank at XO Bank Group Over New Amendment;" Fidelity Summer Street Trust, et al. v. Toronto Dominion Group, et al., 2002 WL 1858763.

4. Rights of Committees to Bring Avoidance Actions

A. In re Cybergenics, 2002 WL 31554591 and 304 F.3d 316.

B. In re Housecraft Industries, 310 F.3d 64.

C. In re Trism Inc., 282 B.R. 662

5. Plan Confirmation:

A. Lock-Ups

In re Stations Holding Company Inc. in the U.S. Bankruptcy Court for the District of Delaware, bankruptcy case number 02-10882 (MFW): transcript of omnibus hearing held on Sept. 25, 2002, at 1:13 p.m.

B. Confirmation Issues

In re XO Communications Inc. in the U.S. Bankruptcy Court for the Southern District of New York, bankruptcy case number 02-12947: Statement of the Official Committee of Unsecured Creditors Regarding Confirmation of the Third Amended Plan of Reorganization for XO Communications Inc., Objection of Wells Fargo Bank Minnesota N.A., as Successor Indenture Trustee, to Debtor's Third Amended Plan of Reorganization and to Motion for Approval of Shareholder Litigation Settlement, Limited Objection of Franklin Mutual Advisers LLC to Confirmation of the Third Amended Plan of Reorganization for XO Communications Inc., Memorandum of Law in Support of Confirmation of Debtor's Third Amended Plan of Reorganization as It Relates to the Stand-Alone Plan and Response to Objections to Confirmation, and Order Confirming Third Amended Plan of Reorganization.

C. Relitigation and Effect of Confirmation

In Re PWS Holding Corp., 303 F.3d 308.

In re Geotek Communications Inc., 2002 WL 31239847 (U.S. Tax Ct.).

In re Dial Business Forms Inc., 283 B.R. 537.

Geoff Groshong discussed his article on claims trading issues from the debtor's perspective. The meeting was adjourned at 5:00 p.m.

2002 Annual Spring Meeting

April 20, 2002 9:30 a.m.

The Meeting was conducted by co-chairs Glenn E. Siegel and Geoff Groshong.

I. INTRODUCTION -
Siegel introduced the program, describing three topic areas of discussion: (a) claims trading issues raised by the Comdisco case; (b) accounting and other issues raised in the Enron matter; and (c) recent cases involving Subordination, Recharacterization, and Trust Indentures.

II. MATERIALS -
(a) General Materials including pleadings concerning Enron, and other cases of interest to committee members concerning subordination, and recharacterization and trust indentures; and
(b) Selected materials from Comdisco, Inc., Case no. 10-24795 (RB).

III. CLAIMS TRADING PROJECT -
Siegel also discussed the status of the Committee's publication project concerning claims trading. Three of the chapters (Are Traded Claims Securities?; Debtor Issues; Consumer Issues) will be published in the Fall edition of the American Bankruptcy Institute Law Review. There is still the need for additional authors on uncovered topics.

IV. PRESENTATIONS

A. COMDISCO -
Groshong discussed the Comdisco claims trading issues. Comdisco and 50 of its domestic affiliates filed Chapter 11 petitions. Comdisco's foreign affiliates did not file. Pre-petition, Comdisco and its affiliates, both domestic and foreign, had entered into a series of credit agreements. The credit agreements contained a provision prohibiting the lending banks from assigning their claims without the consent of Comdisco, which could not be unreasonably withheld. The banks filed a motion seeking an order of the bankruptcy court allowing them to trade their claims notwithstanding the anti-assignment provision. They made three arguments:

(1) That rule 3001(e) of the Federal Rules of Bankruptcy Procedure allowed transfer notwithstanding the anti-assignment provision;

(2) the anti-assignment provision was ineffective under the N.Y. State common-law rule of explicitness and

(3) Comdisco's refusal to consent to assignment was unreasonable.

The Committee also argued, but did not brief, the proposition that Comdisco should not be able to enforce rights under the credit agreements when it was in breach. The bankruptcy court denied the banks' motion on procedural and substantive grounds; As to Rule 3001(e), the Court held that it is a procedural rule which takes effect after transfer has already taken place. It presupposes a valid transfer. Also, the clause was sufficiently explicit.

B. ENRON -
Groshong also discussed (Siegel specifically did not participate in this discussion) discussed certain allegations from the Enron class action suit, In re Enron Corporation Securities Litigation, Civil Action No. H-01-3624.

C. BLUEBIRD
Siegel then provided an update on the latest developments in the Bluebird litigation against the Continental Airlines indenture trustees which is now pending in New York State court. The latest decision in the case was a reversal by the New York State Court of Appeals of an Appellate Division decision where the Appellate Division had ruled that the transferee of a claim needed to show its own injury in order to pursue a claim in connection with the transferred claim. (2002 WL 452308)

D. MURPHY MARINE
Siegel then discussed litigation brought in the Holt Industries bankruptcy where creditors attempted to prevent payment of adequate protection payments to bondholders by challenging liens perfected by indenture trustees and the ensuing meltdown of the case engendered by the litigation over entitlement to payments, contempt of the cash collateral order and exclusivity.

E. LOEWEN GROUP
In Loewen a plan was recently confirmed reflecting uncertainty of claims related to whether a trustee had properly noted the inclusion of certain series of notes into a collateral pool wherein creditor distributions reflected the relative risk of a finding that a particular group of bondholders was unsecured.

F. SCOTT CABLE
In Scott Cable, the Debtors were unable to confirm a plan because it did not provide for payment in full of priority tax claims. The debtors then conducted 363 sales and were able to have proceeds paid directly to other creditors over the objection of the IRS. The IRS later moved to subordinate noteholder claims and have the treated as equity and the debtors defended that the characterization of the claims as debt was res judicata because of the finding under a previous Chapter 11 case that they were debt. The IRS said they were not bound by the previous case and the Connecticut Bankruptcy Court has sua sponte transferred venue to Delaware were the court that confirmed the first Chapter 11 plan will rule on the preclusive affect of its order.

V. ADJOURN

2001 Winter Leadership Conference
 

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