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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