Bankruptcy Case Summaries

On December 29, 2017, Life Settlement Absolute Return I, LLC (“LSAR”), along with Senior LS Holdings, LLC (“Senior LS”; collectively with LSAR, the “Debtors”), filed petitions for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Case Nos. 17-13030 and 17-13031).

According to the Declaration in Support of the First Day Motions of Robert J. Davey, III (“Davey Declaration”), LSAR was formed as a special purpose vehicle to invest in life insurance policies in the life settlement market. LSAR has comprehensive agreements with third-parties for the provision of management, administrative and operational services.  Senior LR operates as a holding company for the policies.

According to the Davey Declaration, the Debtors have been unable to pay their existing debt, primarily because many insureds have outlived their actuarial life expectancy, prolonging LSAR’s receipt of cash from the death benefits of the policies.  Thus, it became financially difficult for LSAR to continue servicing premium payments on the policies.

The Debtors have have filed a number of first day motions, including a cash collateral motion, a joint administration motion, and a motion to maintain the Debtors’ bank accounts.  As of the date of this post, the first day hearing has not yet been noticed.  The cases have been assigned to the Honorable Mary F. Walrath.

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

On her The Bottom Line 11 blog, Fox partner Mette Kurth examined a recent U.S. Court of Appeals for the Second Circuit decision in In re MPM Silicones (the Momentive case). The court followed the lead of the Sixth Circuit in establishing a two-step approach to setting the cramdown interest rate on debtor payments for secured claims:

Court Pillars
Copyright: bbourdages / 123RF Stock Photo

A simple proposition—that secured lenders are entitled to receive payments with a present value at least equal to the amount of their claim—has proven surprisingly difficult to apply as courts have pondered whether to follow a “formula approach” or a “market approach” to establish an appropriate “cramdown” interest rate. (A primer is available here if you are new to the debate.)

Secured lenders have scored a significant win in the recent Second Circuit decision in the Momentive case, In re MPM Silicones. Siding with the Sixth Circuit, the Second Circuit has decided that the prevailing market rate for comparable debt should be used—if there is an efficient market for such debt—and that the formula approach should be used only if no efficient market exists.

To read Mette’s full rundown of the decision and its impact, please visit her blog. Mette also provides background on cramdown interest rates in a separate post.

On November 17, 2017, Real Industry, Inc., along with its subsidiaries and affiliates (collectively the “Debtors” or “Real Industry”), filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Case No. 17-12464).

According to the Declaration in Support of First Day Motions of Michael J. Hobey, liquidity issues and certain singular negative events have led to Real Industry’s bankruptcy filing. The Debtors operate an aluminum recycling and alloy production company based in Beachwood, Ohio.

Contemporaneously, Real Alloy Holding, Inc. and its U.S. subsidiaries filed petitions for voluntary Chapter 11 reorganization in the U.S. Bankruptcy Court for the District of Delaware.  However, Real Alloy’s operations in Germany, United Kingdom, Norway, Canada and Mexico and its Goodyear, Ariz. joint venture are not included in the filings.

The First Day Hearing is scheduled for Monday, November 20th at 1:00 PM at US Bankruptcy Court, 824 Market St., 5th Fl., Courtroom #5, Wilmington, Delaware.  The Debtors have have filed a number of First Day Motions, including, but not limited to, the following:

  • Motion to Pay Employee Wages and Maintain and Continue Certain Compensation and Benefit Programs Postpetition;
  • Motion for Continuation of Utility Service and Approval of Adequate Assurance of Payment to Utility Company Under Section 366(b);
  • Motion to Pay Critical Trade Vendor Claims and Authorizing the Debtors to Pay Certain Prepetition Claims of Shippers, Warehousemen, and Materialmen; and Authorizing Banks to Honor and Process Checks and Electronic Transfer Requests Related Thereto; and
  • Motion to Authorize Debtors to (A) Continue Performing Under Prepetition Hedging and Trading Arrangements and Honor Obligations Related Thereto, and (B) Enter Into and Perform Under New Postpetition Hedging Arrangements.

The cases have been assigned to the Honorable Kevin J. Carey.  The proposed claims and noticing agent is Prime Clerk LLC.

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

In the recent decision of Indian Harbor Ins. Co. v. Zucker, 860 F.3d 373 (6th Cir. 2017), the Sixth Circuit Court of Appeals held that a liquidation trustee’s suit against the debtor’s former directors and officers (D&Os) falls within the “insured-versus-insured” exclusion in the debtor’s liability insurance policy.

The liquidation trustee sued the D&Os for $18.8 million, alleging breach of fiduciary duties.  The insurance company filed a suit for a declaratory judgment that it had no obligation to cover any damages from the lawsuit because the trustee’s claims fell within on the “insured-versus-insured” exclusion, which excluded from coverage “any claim made against an Insured Person . . . by, on behalf of, or in the name or right of, the Company or any Insured Person,” except for derivative suits by independent shareholders and employment claims.  The District Court held that exclusion applied.  The Circuit Court affirmed.

The Sixth Circuit held that, “[a]s a voluntary assignee, the Trust stands in [debtor] Capitol’s shoes and possesses the same rights subject to the same defenses.  Just as the exclusion covers a lawsuit ‘by’ Capitol, it covers a lawsuit ‘by’ the Trust ‘in the . . . right’ of Capitol.”

The fact that the debtor became a new entity – a debtor in possession – upon filing for bankruptcy did not change the result because “this new-entity argument surely would not work before bankruptcy.  Capitol could not have dodged the exclusion by transferring a mismanagement claim to a new company – call it Capitol II – for the purpose of filing a mismanagement claim against the [D&Os].  No matter how legally distinct Capitol II might be, the claim would still be ‘by, on behalf of, or in the name or right of’ Capitol.  The same conclusion applies to a claim filed after bankruptcy.”

The Sixth Circuit acknowledged that the purpose of the “insured-versus-insured” exception was to prevent people within the insured company from “push[ing] the costs of mismanagement onto an insurance company just by suing (and perhaps collusively settling with) past officers who made bad business decisions.”  Nevertheless, it mattered not that the bankruptcy court approval of the plan transferring the causes of action provided “a safeguard against the collusive suits that insured-versus-insured exclusions seek to prevent” because it did “not eliminate the practical and legal difference between an assignee and a court-appointed trustee that receives the right to sue on the estate’s behalf by statute.”

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

On August 26, 2017, Model Reorg Acquisition, LLC, and eighteen of its subsidiaries and affiliates (collectively, “Model Reorg” or “Debtors”), filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (No. 17-11794).

The Debtors, which primarily operate under the brand “Perfumania”, comprise the largest national specialty retailer and distributor of fragrances and beauty products.  According to a press reslease issued by Perfumania Holdings, Inc., Model Reorg “has initiated a recapitalization to be facilitated through a pre-packaged Plan of Reorganization (“the Plan”) to reduce its retail store count to better align with current consumer shopping patterns, increase investments in its e-commerce business, and become a privately-held Company.”   A link to the press release can be found here.

The case has been assigned to the Honorable Christopher S. Sontchi.  The Debtors are represented by the law firm of Skadden Arps Slate Meagher & Flom LLP.  The First Day hearing is noticed to take place today, at 2:00 p.m.

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

On June 13, 2017, The Original Soupman, Inc. and its affiliates (collectively “Debtors” or “Original Soupman”) commenced voluntary bankruptcy proceedings under Chapter 11 of the Bankruptcy Code.  According to its petition, Original Soupman estimates that its assets are between $1 million and $10 million, and its liabilities are between $10 million and $50 million.

Shortly after the commencement of the bankruptcy case, the Debtors filed a number of first-day motions, including a critical vendor motion, and a DIP financing motion.  The first-day hearing to consider the interim relief requested in the various first-day motions is scheduled for June 20th at 2:00 p.m.  The case has been assigned to the Honorable Laurie Selber Silverstein.  The law firm of Polsinelli PC represents the Debtors in these bankruptcy proceedings.

A recent press release issued by the Debtors advises that Original Soupman obtain $2 million debtor in possession financing, and that operations of the Debtors will resume during the course of the bankruptcy. Stay tuned for further developments in this 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

On May 17, 2017, GulfMark Offshore, Inc. (“GulfMark” or “Debtor”) filed a voluntary petition for bankruptcy relief under chapter 11 of the Bankruptcy Code in the United States District Court for the District of Delaware.

According to the first day declaration of Brian J. Fox, the managing director of Alvarez & Marsal North America, LLC, the restructuring advisor to the Debtors, GulfMark will file a prepackaged plan of reorganization.  Through the plan, GulfMark will equitize $400 plus million of its unsecured bond obligations and bolster its liquidity through a rights offering in the amount of $125 million.

The declaration states that general unsecured creditors will not be impacted by the restructuring.  The Debtor’s Petition lists estimated assets of between $100 to $500 million, and its estimated liabilities of between $500 to $1,000 million.

The hearing to consider the Debtor’s proposed Disclosure Statement for the Debtor’s Plan of Reorganization has been scheduled for June 26th. The case has been assigned to 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

Serving as an illustration of the principal that a financial restructuring won’t save a business that has ceased to be frequented by customers, RadioShack has filed for bankruptcy for the second time in as many years.  The prior case was filed in the Bankruptcy Court for the District of Delaware as case no. 15-10197.  This case is also in the Bankruptcy Court for the District of Delaware, and is case no. 17-10506.  Prime Clerk is the noticing agent in both cases and maintains a copy of the Court’s docket on its website –

The first bankruptcy had three primary results: 1) RadioShack closed approximately 2,400 stores, 2) the remaining stores were sold as a going concern to General Wireless, Inc., and 3) an agreement was entered into with Sprint, providing for co-branded product, exclusive access for Sprint within the RadioShack stores, and the payment of a portion of RadioShack rents by Sprint.

At the time of this second bankruptcy filing, there were over 1,500 stores in operation.  According to the first day declaration of Dene Rogers (the “Rogers Declaration”) in support of this bankruptcy, RadioShack is again seeking to shed underperforming leases and pursue a sale or restructuring.  As part of this process, it has transferred 115 stores to Sprint in exchange for a $12 million payment and the termination of the Sprint agreement, with the possibility of receiving another $5 million following an investigation period.

RadioShack has sought authority to close and liquidate the inventory of “between 530 and substantially all of their stores.”  See Rogers Declaration at 22.  Accordingly, creditors will want to keep close tabs on this case to make sure that any debts owed or claims they may have are not eliminated.

John Bird is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  John is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach John at (302) 622-4263 or at

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

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