Earlier this month, Qimonda Richmond, LLC and Qimonda North America Corp (collectively, the “Debtors”), filed adversary actions against various defendants in the United States Bankruptcy Court for the District of Delaware. As alleged in the complaints, Debtors contend that the defendants received preferential transfers which are subject to avoidance under section 547 of the Bankruptcy Code. This post will look briefly at why Qimonda filed for bankruptcy, plus provide a status regarding the preference actions.
The Bankruptcy Proceeding
Debtors originally filed petitions for bankruptcy in Delaware on February 20, 2009 (the “Petition Date”). According to Debtors’ Affidavit in Support of its Bankruptcy Motions (the “Affidavit”), Debtors were one of the largest producers of semiconductor “memory products” with operations in Europe, Asia and North America. Qimonda AG specialized in the production of “dynamic random acess memory” (“DRAM”) memory products with end users such as HP, Dell, IBM and Sony.
Why Qimonda Filed For Bankruptcy
Beginning in March of 2007, the market price for Qimonda AG’s memory products began to drop due to decreased demand. As more and more DRAM products came onto the market, prices continued to fall. According to Debtors’ Affidavit, DRAM prices dropped 85% in 2007 and 58% in 2008. In an effort to restructure its business, Qimonda AG closed its Vermont operations in June 2008. In October, Qimonda AG let go over 1,000 employees at its Richmond facility. Two months later Qimonda was notified by the New York Stock Exchange that it was not in compliance with the NYSE’s listing standards as its market capitalization fell below $100 million. Qimonda AG began insolvency proceedings in Germany on January 23, 2009 and this bankruptcy proceeding soon followed.
The Avoidance Actions
Preference actions are frequently brought by a liquidating trust or creditors committee of the bankruptcy estate. In the Qimonda bankruptcy, the preference actions were filed by the Debtors instead of a third party. According to the preference complaints, Qimonda continues to operate as a debtor in possession. Qimonda is represented by Silverman Acampora LLP and Elliott Greenleaf. The avoidance actions, along with the Qimonda bankruptcy proceeding, are before the Honorable Mary F. Walrath. Judge Walrath previously served as Chief Judge of the Delaware Bankruptcy Court. At the time of this post, there does not appear to be a date and time scheduled for the initial scheduling conference.