Bankruptcy Case Summaries

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.

Made-in-the-USA retailer American Apparel, LLC and its affiliated entities (“Debtors”) filed for Chapter 11 bankruptcy protection on Monday, Nov. 14th for the second time in just over a year, colloquially known as the “Chapter 22”.  The filing comes just about a year after the fashion retailer previously filed for bankruptcy, when the company exited court protection in early 2016 but quickly encountered trouble again.

Canadian clothing manufacturer Gildan Activewear has agreed to a $66 million deal to acquire intellectual property assets and inventory from American Apparel, including the chance to maintain some or all of the company’s Los Angeles production and distribution operations, according to a court filing.

According to chief restructuring officer Mark Weinstein, “[t]he company faced unfavorable market conditions that were more persistent and widespread than the debtors anticipated. These market conditions were particularly detrimental to retailers.”  According to Weinstein, American Apparel’s turnaround strategy “completely failed” as the company reported a 33% decline in year-over-year sales as of Sept. 30. Since its first bankruptcy, the company failed to optimize merchandising, bolster online sales, improve quality expeditiously and form a cohesive marketing plan, according to Weinsten.

With 110 stores in 28 states and the District of Columbia, American Apparel has dwindled from the time of its original bankruptcy filing, when it had about 8,500 employees at six factories and 230 stores worldwide.  The company listed about $215 million in debts. It had $497 million in net sales in 2015.

The First Day Hearing is today (11/15) at 9:00 a.m.  The bankruptcy proceeding has been assigned to the Honorable Brendan L. Shannon.

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 decision of In re Metroplex on the Atlantic, LLC, 545 B.R. 786 (Bankr. E.D.N.Y. 2016), the United States Bankruptcy Court for the Eastern District of New York held that an easement is an in rem property interest, subject to sale free and clear under Bankruptcy Code section 363(f).

The debtor constructed a building on property facing the Far Rockaway ocean.  Almost 100 years earlier, an easement had been granted to owners of an adjacent property, giving them a right of way to the ocean. The debtor and its secured creditor proposed a plan that provided for the property to be sold free and clear of all claims and interests, including the easement.  The owner objected, arguing that the property could not be sold free and clear of the easement.

The bankruptcy court found that the easement was an in rem property interest:  “An easement is more than a personal privilege to use another’s land, it is an actual interest in that land.”  As such, the court held it was subject to sale free and clear under section 363(f), and concluded that the easement owner could be compelled to accept a monetary satisfaction for the easement under state law.

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 August 12, 2016, petitioning creditors Beal Bank USA and CLMG Corp. filed an involuntary chapter 11 bankruptcy petition against Bennu Titan LLC (f/k/a ATP Titan LLC).  The involuntary debtor is affiliated with Bennu Oil & Gas, a deep water oil exploration firm based in Harris County, Texas.

For a link to a brief post discussing involuntary bankruptcies in general, click here.  Under Section 303 of the Bankruptcy Code, a debtor can be “forced” into an involuntary bankruptcy.  11 U.S.C.§ 303(b)(1).  If a company has 12 or more creditors, an involuntary petition requires three or more creditors whose claims are not contingent as to liability or subject to a bona fide dispute as to either liability or amount to file the petition.

The involuntary bankruptcy petition was filed in the United States Bankruptcy Court for the District of Delaware, and has been assigned to Judge Laurie Selber Silverstein, Case No. 16-11870.

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.

The operator of the Fox and Hound, Bailey’s Sports Grille and Champps Kitchen and Bar chains filed for Chapter 11 bankruptcy protection on Wednesday, August 10th, listing debts that significantly exceeded assets.

Last Call Guarantor LLC and at least eight affiliates (“Debtors”) filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware. The filing constitutes the second bankruptcy filing for chain restaurants.

According to the Petition, the Debtors have up to 49 creditors and liabilities of up to $500 million, including more than a half million owed to a food services company based out of Illinois.   Assets were estimated of approximately $50 million.

In 2013, the operator of Fox and Hound and Champps restaurants sought bankruptcy protection. In 2014, a group of lenders led by distressed investor Cerberus Capital Management won bankruptcy-court approval to purchase the chains out of the original bankruptcy filing for more than $120 million, according to the Wall Street Journal.

The First Day Hearing was heard on August 12th.  The Debtors are represented by the law firm of Greenberg Traurig, LLP.  The case number of the lead debtor is Case No. 16-11844-KG. The bankruptcy cases are presiding before the Honorable Kevin Gross.

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 July 29, 2016, SLJ Trucking Inc. (“Debtor” or “SLJ”) filed a voluntary bankruptcy petition under Chapter 7 of the United States Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware.  The Debtor is a licensed and bonded freight shipping and trucking company running freight hauling business from Newark, Delaware.

According to the Petition, the Debtor has less than $50,000 in estimate assets, and between $100,000 and $500,000 in estimated liabilities.  The Section 341 meeting of creditors is scheduled for September 1st at 11:00 a.m. at the J. Caleb Boggs Federal Building, 844 King St., Room 2112, Wilmington, DE.

One way in which creditors can assert their interests is to attend the Section 341 Meeting of Creditors, in order to depose the debtor’s representative regarding the assets and liabilities of the bankruptcy estate.  Creditors may retain counsel to conduct such an examination of the debtor’s representative.  The Section 341 meeting of creditors is an integral component of a bankruptcy proceeding.  Creditors often want to know what information is made available, and what procedures are followed, during a typical meeting of creditors.

General topics that are discussed during a Section 341 meeting can include the following issues:

  • The nature of scope of a debtor’s assets and liabilities;
  • The amount of accounts receivable and accounts payable;
  • To what extent the debtor is able to repay its creditors;
  • Whether insurance remains active;
  • The condition and location of goods received in the 20 days before bankruptcy;
  • The condition and location of goods received in the 45 days before bankruptcy;
  • The debtor’s or trustee’s plan to reorganize its debt or liquidate its assets;
  • The debtor’s plan after it emerges from bankruptcy (not applicable to a Chapter 7 debtor);
  • Whether the debtor experienced any changes in revenue since filing for bankruptcy; and
  • Potential avoidance actions to be commenced by the debtor or trustee.

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 July 13, 2016, Appalachian Conventional Production Comp (“Appalachian” or “Debtor”) filed a Chapter 7 liquidation in the United States Bankruptcy Court for the District of Delaware.  According to the Debtor’s Petition, Appalachian has assets less totaling less than $500,000, and liabilities between $500,000 and $1 million.  Click here to view a copy of Appalachian’s Petition, Schedules of Assets and Liabilities, and Statement of Financial Affairs.

Appalachian previously went by the name of Hayden Harper Energy KA, LLC, which was formed in August 2009 with a focus on the acquisition and development of low-risk conventional oil and gas properties in the Appalachian Basin.

The Debtor’s Section 341 meeting of the creditors is scheduled for August 11, 2016 at 11:00 a.m. at J. Caleb Boggs Federal Building, 844 King St., Room 2112, Wilmington, DE 19801.

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 July 1, 2016, Gold Alchemy LLC filed for Chapter 7 bankruptcy protection with the U.S. Bankruptcy Court for the District of Delaware.  According to the petition, the debtor’s estimated assets are $10 to 50 million, and estimated liabilities are $50 to 100 million.

Alchemy is a distribution company formerly known as Millennium Entertainment.  According to Deadline Hollywood:

Alchemy was an enormous buyer out of the 2015 Cannes Film Festival, acquiring titles such as the Colin Farrell film The Lobster and Nanni Morretti’s Mia Madre. The company was financially healthy when it was known as Millennium Entertainment, however financial straits ensued during the Bill Lee era at Alchemy.  Alchemy acquired content distribution outfit AnConnect and Anderson Digital a year ago, saw the departure Lee at the end of 2015, with Alchemy’s Scott Guthrie and Kelly Summers being promoted to co-presidents in an effort to correct the company’s course. Previously Guthrie was COO, while Summers was SVP of strategy and financial planning.

According to the docket, the Section 341 meeting of the creditors is scheduled for July 25th at 10:00 a.m. at the J. Caleb Boggs Federal Building, 844 King Street, Room 2112, Wilmington, Delaware.

The Trustee assigned to the case is George L. Miller.  The debtor is represented by the law firm of Morris, Nichols, Arsht & Tunnell. Judge Kevin Gross is presiding over 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.

On July 1, 2016, SynCardia Systems, Inc. (“Debtor” or “SynCardia”) filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code before the United States Bankruptcy Court for the District of Delaware.

According to the Declaration of Stephen Marotta, the Debtor’s Chief Restructuring Officer, SynCardia is a medical technology company that develops artificial heart implants.  In the months leading to the Debtor’s  filing, SynCardia attempted but then withdrew an IPO attempt due to adverse market conditions.  Since then it has become insolvent.

Through the bankruptcy, SynCardia seeks to sell substantially all of its assets on a liquidated basis.  To this end, SynCardia entered into a stalking horse asset purchase agreement with its senior lender in contemplation of a Section 363 sale before the Bankruptcy Court.

SynCardia’s first-day hearing is scheduled for Wednesday, July 6th at 2:00 p.m. (ET).  Among other things, the Debtor has filed a sale motion through which it seeks to establish and approve bid procedures for the sale of substantially all of its assets, and to establish procedures to assume and assign certain executory contracts and unexpired leases.

The Debtor’s bankruptcy proceeding is pending before Judge Walrath.  SynCardia is represented by the law firm of Young, Conaway, Stargatt & Taylor, 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.

Yet another company in the energy sector has filed for bankruptcy protection.  On June 17, 2016, Maxus Energy Corporation, and its affiliates (“Debtors”) filed for chapter 11 protection in the United States Bankruptcy Court for the District of Delaware.

A significant portion of this post draws upon information in the first day declaration of Javier Gonzalez [D.I. 2] (the “Declaration”).  The Debtors’ business is comprised of three principal components: (i) management of various oil and gas-related interests held by Maxus and its subsidiaries, (ii) environmental remediation management services, and (iii) management of legacy employee benefit obligations to retired former employees.

The Debtors have obtained DIP financing sufficient to carry this case for twelve months, having determined that the “Chapter 11 Cases will provide the Debtors with the opportunity to assess whether the Debtors’ existing environmental remediation operations and/or oil and gas operations can be restructured as a sustainable, stand-alone enterprise.”  Declaration at *6.  Thus, we can’t be sure if this will liquidate, like so many energy companies have in recent months, or reorganize with the hopes of tapping into an improved climate for energy companies.  The first day hearing is scheduled for today (6/20/2016) at 5:00 p.m. ET.

The case is pending before the Honorable Christopher S. Sontchi.  The Debtors are represented by the law firm of Young, Conaway, Stargatt & Taylor.  This is case number 16-11501-CSS.  The proposed claims and noticing agent in this case is Prime Clerk LLC.  Prime Clerk has established a website for this case at https://cases.primeclerk.com/maxus/.

The primary source of liabilities are the environmental remediation obligations held by the Debtors.  As I have seen in other cases, environmental liabilities can be crushing.  Luckily, my experience with environmental remediation issues came under the tutelage of Jeff Pollock, in our Princeton office (who is regularly recognized as a top environmental lawyer).

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.