Adequate Assurance

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…

Introduction

In a recent decision in the Distributed Energy Systems bankruptcy ("DES" or "Debtors"),  the Honorable Kevin Gross of the United States Bankruptcy Court for the District of Delaware provided a concise discussion of what is required for a debtor to assume and assign an executory contract.  DES filed a motion seeking to assume and assign contracts with ePower and Vestas Wind Systems to CB Wind Acquisition Corp ("CB Wind").  CB Wind previously purchased all of Debtors’ assets. Due to what Debtors’ termed a "scrivener’s error,"  the ePower and Vestas contracts were not included in the schedules to the original asset purchase agreement.

ePower objected to the assumption of its contract on several grounds.  First, ePower argued that DES failed to prove CB Wind could provide adequate assurance of future performance.  Next,  ePower claimed that its contract was not an executory contract and therefore not subject to assumption and assignment under section 365 of the Bankruptcy Code.  Finally,  ePower argued that Debtors’ failure to include its contract in the sale motion evidenced its original intent to reject the agreement. …

Continue Reading Distributed Energy Decision Provides Analysis of Adequate Assurance and Executory Versus Non-Executory Contracts

Introduction

When a company files for bankruptcy, often it will reject some or all of its commercial leases. Alternatively, some debtors in bankruptcy choose to assume and assign their leases to third parties. By assigning its lease, the debtor is in essence selling its lease to the highest bidder. Large retailers who file for bankruptcy…