ATopTech, Inc. (“ATopTech” or “Debtor”), an electronic design automation software company manufacturing software solutions for engineers to assist them in the physical design of integrated circuits, filed a voluntary petition for chapter 11 bankruptcy relief on January 13, 2017 in the United States Bankruptcy Court for the District of Delaware.

In addition, ATopTech filed a motion to sell its businesses under section 363 of the Bankruptcy Code and has selected a stalking horse bidder. The Debtor expects that the sale will be completed by March 31, 2017.

The Debtor’s petition lists between $10 and $50 million in assets and liabilities.  The case has been assigned to the Honorable Mary F. Walrath, case number 17-10111.  The Debtor is being represented by the law firm of Dorsey & Whitney, LLP.

A first-day hearing has not yet been scheduled, although the Debtor has filed a notice of agenda, which can be accessed here.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

In the recent decision of In re: Abeinsa Holding Inc. et al., Del. Bankr. Ct. Dec. 14, 2016), Case No. 1:16-bk-10790, the Honorable Kevin J. Carey confirmed clean energy developer Abeinsa Holding Inc.’s Chapter 11 plan, which is part of the $16.5 billion global restructuring for Spanish parent Abengoa SA.  Abengoa, with operations in about 50 nations, is a major figure in clean energy and environmental sustainability engineering.

The plan was confirmed over the objections of the U.S. Trustee’s office, which complained among other things of the liability releases contained in the plan.

The Court agreed with the U.S. Trustee that the liability releases contained in the Chapter 11 plan are broad.  However, the Court found that they do not violate the Bankruptcy Code and were necessary, negotiated-for components of the exit strategy.  Notably, no creditors objected to the releases, which the Court found to be of significance.

The Court found the liability releases to be the result of extensive bargaining, and essential to the deal in which Abeinsa’s parent and other entities would bring in enough new money to make the exit strategy feasible and not cripple a crucial component of Abengoa’s multilayered global restructuring strategy.

One key objection from creditor Portland General Electric Co. (“PGE”), which has a litigation claim against Abeinsa for more than $200 million in damages on breach-of-contract claims. PGE’s objection dealt with the complex structure of Abeinsa’s bankruptcy plan, and a measure that has parent Abengoa retaining ownership of its subsidiary companies that the creditor argues is in violation the Chapter 11 absolute priority rule, which places equity holders at the very bottom when it comes to order of recovery.

Judge Carey overruled PGE’s objection, finding that there is an exception to the absolute priority rule when a stakeholder brings new value to the case.  The Court found that Abengoa was doing so with a new value contribution of nearly $40 million, part of which will be used for creditor distribution.

Abeinsa’s plan, a major component of Abengoa’s global restructuring effort, calls for four separate subplans that will liquidate some Abengoa subsidiaries and restructure others with $1 billion in new investment being injected.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On December 21, 2016, Modular Space Corporation and its affiliated entities (“Modular Space” or the “Debtors”) filed for bankruptcy protection in the U.S. and Canada, to implement a plan to rework its $1 billion load of long-term debt.  Modular Space will continue its operations during what the restructuring. Modular Space makes, leases and sells office trailers, mobile offices, temporary classrooms, modular office complexes and portable storage units.

A restructuring that will swap out about $400 million worth of debt for equity was negotiated in advance of the bankruptcy filing in the U.S. and the initiation of Canadian restructuring proceedings in Toronto.

The slowdown in the oil-and-gas sector and mining hurt Modular Space’s sales, according to papers filed with the Delaware Bankruptcy Court. With nonresidential construction numbers falling sharply, Modular Space was up against lowered demand and pricing pressures that ate into its margins.

The Debtors are represented by Cleary Gottlieb Steen & Hamilton LLP, Lazard Frères & Co. LLC, and Young Conaway Stargatt & Taylor LLP.  The case is pending before the Honorable Kevin J. Carey.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

From December 15-21, 2016, the Seal123, Inc. Liquidation Trust filed approximately 68 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 544 and/or 547, 548 and 550 of the Bankruptcy Code (depending upon the nature of the underlying transactions).  The Liquidation Trust also seek to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code.

The Seal123, Inc., and its affiliated debtors, filed voluntary petitions for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on January 15, 2015 under Chapter 11 of the Bankruptcy Code.   On October 30, 2016, the Court confirmed the Debtors’ First Amended Joint Plan of Liquidation.

The various avoidance actions are pending before the Honorable Christopher S. Sontchi.  The pretrial conference has been scheduled for February 28, 2017  at 10:00 AM at US Bankruptcy Court, 824 Market St., 5th Fl., Courtroom #6, Wilmington, Delaware.

For preference defendants looking for an analysis of defenses that can be asserted in response to a preference complaint, below are several articles on this topic:

Preference Payments: Brief Analysis of Preference Actions and Common Defenses

Minimizing Preference Exposure: Require Prepayment for Goods or Services

Minimizing Preference Exposure (Part II) – Contemporaneous Exchanges

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

In the recent decision of George L. Miller v. Edward Welke, et al. (In re United Tax Group, LLC), Adv. Pro. No. 16-50088 (LSS), the Delaware Bankruptcy Court considered a motion for judgment on the pleadings in connection with the Trustee’s complaint asserting preference and fraudulent transfer claims.

The Court found that the Trustee failed to adequately plead all counts necessary to give rise to a preference claim.  Specifically, the Court held that the Trustee failed to: (i) identify the transferee of each transfer, and (ii) identify the nature and amount of each alleged antecedent debt.  The Court also declined to consider the Trustee’s factual allegations raised in his answering brief.

As for the fraudulent transfer claims, the Court found that the Trustee failed to allege facts necessary to demonstrate that the debtor was insolvent at the time such transfers were made, which is an element of a fraudulent transfer claim under Section 548 of the Bankruptcy Code.  In addition, the Trustee failed to set forth a factual basis for his contention that the Debtor received less than reasonably equivalent value for certain of the transfers. The Court found that the Trustee’s allegations merely parroted the language of Section 548.

In light of the above, the Court granted dismissal of the Trustee’s claims, but granted leave for the Trustee to amend the complaint to adequately plead facts to support the Trustee’s claims.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

In the Limitless Mobile, LLC bankruptcy proceeding (Delaware Bankruptcy Case No. 16-12685), a formation meeting has been scheduled for December 16, 2016 at 10:00 a.m. (ET) at the J. Caleb Boggs Federal Building, 844 King Street, Room 3209, Wilmington, DE 19801.  Click Here for a copy of the Notice of Formation Meeting for Official Committee of Unsecured Creditors issued by the Office of the United States Trustee.  Unsecured creditors interested in being considered for committee membership must complete a questionnaire and return it to the U.S. Trustee no later than December 14, 2016.

One way in which creditors can assert their interests is to attend the Formation Meeting and become a part of the official committee of unsecured creditors.  The creditors’ committee is one of the most active participants in a corporate bankruptcy, and has access to a significant amount of information not available to normal creditors.

Since the Limitless Mobile bankruptcy was filed earlier this month, the Delaware Bankruptcy Court has had an opportunity to consider and rule on many of the debtor’s initial motions.  On December 8th, the Bankruptcy Court entered the following orders:

12/08/2016  

31
(6 pgs)

Order Approving Retention And Appointment of Rust Consulting/Omni Bankruptcy as Claims And Noticing Agent (Related Doc # 4)(related document(s)4) Order Signed on 12/8/2016. (JohnstonJ, Julie) (Entered: 12/08/2016)
12/08/2016  

32
(4 pgs)

Order (INTERIM) (I)Authorizing The Debtor to Maintain And Renew Prepetition Insurance Policies And Pay All Obligations in Respect Thereof And (II)Granting Related Relief (Related Doc # 5)(related document(s)5) Order Signed on 12/8/2016. (JohnstonJ, Julie) (Entered: 12/08/2016)
12/08/2016  

33
(4 pgs)

Order (INTERIM) (I)Authorizing The Debtor To Pay Certain Prepetition Taxes And (II)Granting Related Relief (Related Doc # 6)(related document(s)6) Order Signed on 12/8/2016. (JohnstonJ, Julie) (Entered: 12/08/2016)
12/08/2016  

34
(7 pgs; 2 docs)

Order (INTERIM) (I)Approving Debtor’s Adequate Assurance of Payment To Utility Companies, (II)Establishing Procedures For Resolving Objections By Utility Companies, And (III)Prohibiting Utility Companies From Altering, Refusing, or Discontinuing Service And (IV)Setting A Final Hearing. (Related Doc # 7)(related document(s)7) Order Signed on 12/8/2016. (JohnstonJ, Julie) Additional attachment(s) added on 12/8/2016 (JohnstonJ, Julie). (Entered: 12/08/2016)
12/08/2016  

35
(6 pgs)

Order (INTERIM) (I)Approving Continued Use of Existing Cash Management System And Bank Accounts; (II)Waiving Certain United States Trustee Requirements; And (III)Granting Related Relief (Related Doc # 8)(related document(s)8) Order Signed on 12/8/2016. (JohnstonJ, Julie) (Entered: 12/08/2016)
12/08/2016  

36
(3 pgs)

Order (I)Authorizing Debtor To Honor or Pay Certain Prepetition Obligations To Customers And (II)Authorizing And Directing Financial Institutions To Honor And Process Checks And Transfers Related To Such Relief (Related Doc # 9)(related document(s)9) Order Signed on 12/8/2016. (JohnstonJ, Julie) (Entered: 12/08/2016)
12/08/2016  

37
(11 pgs; 2 docs)

Order (INTERIM) (A)Authorizing The Debtor To Use Cash Collateral of Existing Secured Lenders And Granting Adequate Protection For Use And (B)Prescribing The Form And Manner of Notice And Setting The Time For The Final Hearing (Related Doc # 19)(related document(s)19) Order Signed on 12/8/2016. (Attachments: # 1 Exhibit 1) (JohnstonJ, Julie) (Entered: 12/08/2016)
12/08/2016  

38
(47 pgs; 2 docs)

Order (INTERIM) (I)Authorizing Debtor To Obtain Postpetition Financing,(II)Granting Administrative Priority Claims To DIP Lender, And (III)Scheduling Final Hearing (Related Doc # 20) Order Signed on 12/8/2016.(Attachments: # 1 Agreement) (JohnstonJ, Julie) (Entered: 12/08/2016)
12/08/2016  

39
(2 pgs)

Order Granting Motion of Debtor To Pay Certain Pre-Petition Payroll, Severance, Employee Benefit And Contractor Wage Expenses. (Related Doc # 22)(related document(s)22) Order Signed on 12/8/2016. (JohnstonJ, Julie) (Entered: 12/08/2016)

The Limitless Mobile bankruptcy is before the Honorable Kevin J. Carey.  Limitless Mobile is represented by the law firm of Dilworth Paxson LLP.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On December 2, 2016, Limitless Mobile, LLC (“Limitless” or the “Debtor”) filed a chapter 11 voluntary petition in the United States Bankruptcy Court for the District of Delaware.  The Debtor was formed in 2013 to provide broadband and wireless telecommunication services in certain rural counties in central Pennsylvania.  The Debtor is part of a worldwide corporate family referred to as the Limitless Group.  According to the First Day Declaration, Limitless intends to wind down its retail-side business and emerge from bankruptcy as a wholesale operator.

According to the Petition, the Debtor has an estimated $10 million to $50 million in assets, and $50 million to $100 million in liabilities.  The law firm of Dilworth Paxson LLP represent the Debtor in this chapter 11 case.  The Honorable Kevin J. Carey has been assigned to the case.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

In the recent decision of Pacifica L51 LLC v. New Invs., Inc. (In re New Invs., Inc.), No. 13-36194, 2016 WL 6543520 (9th Cir. Nov. 4, 2016), the Ninth Circuit held that Section 1123(d) of the Bankruptcy Code legislatively overruled Great W. Bank & Tr. v. Entz-White Lumber & Supply, Inc. (In re Entz-White Lumber & Supply, Inc.), 850 F.2d 1338 (9th Cir. 1988), and required debtors to pay interest at the default rate to cure a default pursuant to a plan of reorganization.

The debtor defaulted on a mortgage.  The bankruptcy court confirmed a chapter 11 plan that allowed the debtor to cure the default by selling the property and using the sale proceeds to pay the loan off at the pre-default rate.  At the same time, the court required the debtor to escrow nearly $800,000 as a disputed claim reserve should an appellate court require the debtor to pay default interest to effectuate the cure.  On appeal, the Ninth Circuit reversed.

The Circuit Court ruled that “[t]he plain language of § 1123(d) compels the holding that a debtor cannot nullify a preexisting obligation in a loan agreement to pay post-default interest solely by proposing a cure.”  The Circuit Court stated as follows:

What § 1123(d) affects is how a debtor returns to pre-default conditions, which can include returning to a lower, pre-default interest rate. . . . [Under common law, the] borrower does not effectuate a cure merely by paying past due installments of principal at the pre-default interest rate. Rather, the borrower’s cure obligations may also include late charges, attorneys’ and trustee’s fees, and publication and court costs. . . .  It is only once these penalties are paid that the debtor can return to pre-default conditions as to the remainder of the loan obligation.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Effective January 2, 2017, all telephonic court appearances before the Honorable Kevin Gross of the United States Bankruptcy Court for the District of Delaware will be through CourtSolutions LLC.  The alert was issued by the Court today on November 30th.  Click here for a copy of the notice.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

On November 28, 2016, Judge Laurie Selber Silverstein of the Delaware Bankruptcy Court ruled on a motion for relief from the automatic stay (we she treated as a motion for relief from the discharge injunction) in the Altegrity bankruptcy, Case No. 15-10226.  The “Opinion” is available here.  The Opinion was issued following legal argument and, by agreement of the parties, based only upon undisputed facts.  Opinion at *1.

While various other arguments are addressed by Judge Silverstein, the primary issue within the Opinion boils down to two simple issues – (1) what is a “Claim” in bankruptcy, and (2) did all of the relief sought by the movant (who did not file a claim) constitute “Claims”.  Opinion at *11.

In the Opinion, Judge Silverstein adopts the broad interpretation of a Claim that is routinely used, any “right to payment” constitutes a Claim.  Holding that substantially all of the movant’s claims would be resolved through payment, and because the movant filed no claim in the bankruptcy case, Judge Silverstein denied the Motion in all respects but one – the movant can continue an existing suit to seek to obtain non-monetary relief, including the expungement of his commercial driving report (DAC Report).

A number of other interesting issues are briefly addressed in the Opinion, and I encourage you to follow the above link and read it for yourself.  It is an easy 19-page read.  I note that once again, the Delaware Bankruptcy Court continues to take an expansive view of “Claims” and would advise any party to a bankruptcy to take note of any claims bar date orders.  If a cash payment *could* resolve your grievance with the Debtor, it would be wise to file a claim out of an abundance of caution.

John Bird practices with the law firm Fox Rothschild LLP in Wilmington, Delaware. You can reach John at 302-622-4263, or jbird@foxrothschild.com.