Bankruptcy Case Summaries

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).

On June 5th and 6th, 2016, Houston-based energy firm Hercules Offshore Inc. and its affiliated debtors (“Hercules” or “Debtors”) filed for Chapter 11 bankruptcy protection before the United States Bankruptcy Court for the District of Delaware.

Hercules is an offshore oil drilling services firm and rig operator, that was hit by the plunge in oil prices which briefly dipped below $30 several months after Hercules previously emerged from a chapter 11 bankruptcy November 2015.  Hercules’ assets include jackup rigs and liftboats. The company also provides various shallow-water offshore services, such as drilling, platform inspection and decommissioning.

Hercules has presented a prepackaged bankruptcy plan, which has received the endorsement of 99.7% of its first-lien lenders.  Hercules will use the bankruptcy process to liquidate its operations.  Notably, Hercules intends to fully compensate all unsecured creditors.  Shareholders will receive cash upfront if they vote to accept the plan or will receive a portion of the proceeds from the asset sale if they vote against.

The Debtors’ bankruptcy proceeding is pending before the Honorable Kevin J. Carey.  The Debtors’ first-day hearing is scheduled for June 7, 2016 at 11:30 a.m.

Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Court Pillars
Copyright: bbourdages / 123RF Stock Photo

In an Alert published on Wednesday, Audrey Noll examines the U.S. Supreme Court’s recent ruling in Husky Int’l Elecs., Inc. v. Ritz:

Last month, the U.S. Supreme Court held that the “actual fraud” bar to discharge debts under Bankruptcy Code section 523(a)(2)(A) includes claims based on intentional fraudulent transfers, regardless of whether the debtor made a false representation to the creditor.

In Husky Int’l Elecs., Inc. v. Ritz, 2016 WL 2842452 (May 16, 2016), the justices reversed a Fifth Circuit ruling and resolved a split among the circuits on the issue of whether “actual fraud” under section 523(a)(2)(A) requires a false representation. (Compare In re Ritz, 787 F.3d 312 (5th Cir. 2015)(“actual fraud” requires false representation) with McClellan v. Cantrell, 217 F.3d 890 (7th Cir. 2000)(“actual fraud” encompasses actual fraudulent transfer schemes that do not necessarily include false representation).)

The facts in Husky were fairly straightforward. Husky International Electronics, Inc. sold electronic device components to Chrysalis Manufacturing Corp., which failed to pay for about $164,000 worth of the goods. Chrysalis’s principal, Daniel Lee Ritz, drained Chrysalis of assets by transferring them to other entities that he controlled while Chrysalis was insolvent, and for less than reasonably equivalent value. Husky sued Ritz, seeking to hold him personally liable for the $164,000 debt based on fraudulent transfer and alter ego claims. Ritz then filed a Chapter 7 petition. Husky responded by filing a complaint in the bankruptcy court, objecting to the discharge of Ritz’s alleged debt under Bankruptcy Code Section 523(a)(2)(A) (making debt obtained by “false pretenses, a false representation, or actual fraud” nondischargeable).

To read Audrey’s full discussion of the court’s ruling, please visit the Fox Rothschild website.


Audrey Noll is counsel in the firm’s Financial Restructuring & Bankruptcy Department, in its Las Vegas office.

On May 20, 2016, Joao Bock Transaction Systems, LLC (“Debtor” or “Joao Bock”) filed for Chapter 7 bankruptcy relief before the United States Bankruptcy Court for the District of Delaware.  Joao Bock has been described by some as a “patent troll” that engages in litigation over intellectual property disputes in order to extract favorable settlements.

According to the Debtor’s Petition, Joao Bock has between $1 and $10 million in liabilities.  A section 341 meeting has been scheduled to take place on June 22nd at 11:00 a.m. at the J. Caleb Boggs Federal Building, 844 King St., Room 2112, in Wilmington, DE.

The trustee assigned to this matter is David Carickhoff of the law firm of Archer & Greiner, P.C. The matter is pending before the Honorable Mary F. Walrath.

Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Another North Dakota shale oil driller has filed for bankruptcy protection.  On May 20, 2016, Intervention Energy Holdings LLC, and its affiliates (“Debtors”) sought chapter 11 protection from the United States Bankruptcy Court for the District of Delaware.

Other Williston Basin, ND shale oil victims include Emerald Oil Inc., and Halcón Resources Corp., which indicated that it plans to file for chapter 11 protection if it can get enough creditors to sign off on a deal that would let it restructure more than $3 billion in debt.

According to the Declaration of John R. Zimmerman in Support of the Debtor’s Chapter 11 Petitions and First Day Motions, depressed crude oil prices have contributed to the Debtors’ downward spiral.  The Debtors seek first day relief at a first day hearing scheduled for tomorrow, May 25th at 2:30 p.m.  Among other things, the Debtors have filed a cash collateral motion, wage motion, and a motion to maintain insurance coverage.

The case is pending before the Honorable Kevin J. Carey.  The Debtors are represented by the law firm of DLA Piper.

Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at cneff@foxrothschild.com.

Court Pillars
Copyright: bbourdages / 123RF Stock Photo

In an Alert published on Wednesday, Audrey Noll examines the U.S. Bankruptcy Court for the Northern District of Illinois’ recent ruling in In re Lake Mich. Beach Pottawattamie Resort LLC:

Lenders beware: An Illinois bankruptcy court recently ruled that a lender went too far in its efforts to stop a debtor from filing for bankruptcy. The court invalidated the lender’s “blocking director” provision for explicitly excusing the lender from considering any interests other than its own. See In re Lake Mich. Beach Pottawattamie Resort LLC, 2016 WL 1359697 (Bankr. N.D. Ill. April 5, 2016).

The LLC debtor owned and operated a vacation resort. After the debtor defaulted on its secured loan, it entered into a forbearance agreement that required the debtor to amend its operating agreement to establish the lender as an additional “special” member with the right to disapprove of any “material action,” including the filing for bankruptcy relief.

The amended operating agreement also provided that the special member was “entitled to consider only such interests and factors as it desires, including its own interests,” and “to the fullest extent permitted by applicable law, ha[d] no duty or obligation to give any consideration to any interests of or factors affecting the Company or the Members.”

Soon after the forbearance agreement was signed, the debtor defaulted again and the lender filed for foreclosure. The debtor filed a bankruptcy petition on the eve of foreclosure, authorized by the four non-special members. The lender’s special member did not consent.

As of the petition date, the property was worth in excess of $6 million and the secured loan was roughly half of that.

 To read Audrey’s full discussion of the court’s ruling, please visit the Fox Rothschild website.


Audrey Noll is counsel in the firm’s Financial Restructuring & Bankruptcy Department, in its Las Vegas office.

On May 1, 2016, BIND Therapeutics, Inc., and affiliated companies (“Debtors” or “BIND”) voluntarily filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code.

The filing comes days after the Cambridge, Mass., company received a notice of default from lender Hercules Technology III LP, which demanded immediate payment of the $14.5 million the lender says it is owed under the loan.  The Company is backed by Koch Industry Inc.’s David Koch.

According to the First Day Declaration of Andrew Hirsch, President and Chief Executive Officer of the Debtors,BIND is a biotechnology company developing novel targeted therapeutics, primarily for the treatment of cancer.  Bind Therapeutics’ website says it is developing drug treatments that use nanoparticles to treat cancer.

Per the declaration, the Debtors’ ultimate goal in bankruptcy is the maximization of estate value through a plan process, but also a marketing process in the event that other value-enhancing proposals that can be obtained.  In the near term, the Debtors’ immediate objective is to maintain a business-as-usual atmosphere during the early stages of the bankruptcy, with as little interruption or disruption to the Debtors’ operations as possible.

The Debtors in these Chapter 11 cases are represented by Richards Layton & Finger, and Latham & Watkins LLP.  The bankruptcy cases are pending before the Honorable Brendan L. Shannon.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272.

On April 7, 2016, Pacific Sunwear of California, Inc. (aka PacSun, aka Pacific Sunwear) filed for chapter 11 protection in the United States Bankruptcy Court for the District of Delaware.

Through the bankruptcy, Pacific Sunwear is seeking bankruptcy protection in order to get rid of two thirds of its debt and restore its balance sheet, according to CEO Gary Schoenfeld in a statement. Pacific Sunwear is also looking to reduce the cost of running its stores, either by negotiating with landlords or getting out of leases.

Landlords need to pay close attention to this bankruptcy.  Pacific Sunwear has approximately 600 retail store locations across the country.  Not surprisingly, the Debtors have already filed a motion to establish procedures for rejecting executory contracts and unexpired leases.

Whether Pacific Sunwear rejects store leases, or assumes the leases, the rights of Pacific Sunwear’s commercial landlords will invariably be impacted.  Below is a link to a previous post titled “Ten Things Every Commercial Landlord Should Know About a Tenant in Bankruptcy.”  This link provides a brief summary of some of the issues landlords should consider when a commercial tenant such as Pacific Sunwear files for bankruptcy.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272.

The Spanish renewable energy solar company giant, Abengoa SA and its American affiliates, have filed for bankruptcy protection before the U.S. Bankruptcy Court for the District of Delaware.  The Spanish energy company continues talks with its banks and bondholders to agree on its plan to restructure billions of dollars in debt.

Background

Abengoa is one of the world’s top builders of power lines transporting energy across Latin America and a top engineering and construction business, making large renewable-energy power plants in places from Kansas to the United Kingdom.

Additionally, on March 28, 2016, Abengoa S.A., the parent company of the debtors, and approximately twenty affiliated Spanish companies (the “Chapter 15 Debtors”), filed petitions for relief under chapter 15 of the Bankruptcy Code in this Court.

Debtors’ Utilities Motion

The furnishing of utilities to the Abengoa Debtors will become an issue of import in this case.  According to the Declaration of William H. Runge, III in support of the Abengoa Debtors’ first day pleadings:

Uninterrupted Utility Services are essential to the Debtors’ business operations during the pendency of these cases. Should any Utility Company alter, refuse or discontinue service, even for a brief period, the Debtors’ business operations could be severely disrupted, and such disruption would jeopardize the Debtors’ efforts. It is essential that the Utility Services continue uninterrupted.

Along these lines, at the first day hearing, the Debtors obtained an interim utilities order, which among other things approved: (i) the Debtors’ proposed form of adequate assurance, (ii) establishing procedures for resolving objections by utility companies, (iii) prohibiting utility companies from disconnecting service, and (iv) scheduling a final hearing.

Under the interim utilities order, a final hearing on the Debtors’ utility motion is April 27th at 10:00 a.m., and the objection deadline is 7 days prior.

Carl D. Neff is a partner with the law firm of Fox Rothschild LLP.  Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272.