On February 4, 2010, Ultimate Acquisition Partners, LP d/b/a Ultimate Electronics (Delaware Case No. 11-10245) filed a motion seeking authority to engage in liquidating sales of its 46 stores. While not of the size of the Circuit City bankruptcy, the progression of the two bankruptcies is similar. The Circuit City bankruptcy is now in the midst of massive bankruptcy preference litigation. There is no reason to believe that Ultimate Electronics will not end up in the same place. In fact, the Ultimate Electronics bankruptcy looks far worse for the potential bankruptcy preference defendants. The filings made by Ultimate Electronics to date are replete with references to difficulties the debtor was having with suppliers – a bad flag for the availability of the ordinary course of business defense. For these reasons, Ultimate Electronics has been put on our bankruptcy preference watch list, even though the statute of limitations will not expire until January 26, 2013.
On January 24, 2011, a hearing will be held in the Contech U.S., LLC (“Contech”) bankruptcy (Eastern District of Michigan, Southern Division ) on the Chapter 7 Trustee’s Motion for an Order Establishing Uniform Procedures and Deadlines for Certain Adversary Proceedings (the “Procedures Motion”). The Chapter 7 Trustee, Gene R. Kohut, has advised the Bankruptcy Court that the he will be filing as many as 200 bankruptcy preference complaints on or before January 30, 2011. The time frames set out in the procedure motions convey the clear message that a substantial effort will be made to settle as many of the preference actions as quickly and as efficiently as possible.
On December 29, 2010, with only 2 weeks left before expiration of the statute of limitations for bringing preference actions, the Creditors Committee in the Checker Motors Corporation bankruptcy (Bankruptcy Court for the Western District of Michigan Case No.: 09-00358) moved for authority to file preferential transfer recovery actions (the “Standing Motion”) in anticipation of the approval of the proposed Plan of Liquidation. The Plan of Liquidation contemplates that all remaining assets of the Debtor, including avoidance actions under Chapter 5 of the Bankruptcy Code, will be assigned to a Liquidating Trust. With no filed opposition to the creditors committee’s motion, there is no reason to expect that the requested authority will not be granted.
With scarcely 4 months remaining on the statute of limitations for bringing Section 547 bankruptcy preference actions (it expires on February 5, 2011), the bankruptcy case of Brunos Supermarkets, LLC has moved on to the bankruptcy preference watch list.
The demise of Hard Rock Theme Park in Myrtle Beach, S.C. was a stunning disappointment. After two years of construction and a lavish opening in June, 2008, the $400 million entertainment complex – boasting the ability to entertain 30,000 visitors a day — closed its doors and opted for bankruptcy court less than four months later. In re HRP Myrtle Beach Holdings, LLC, Administratively Consolidated in Case No. 08-12193 in the United States Bankruptcy Court for the District of Delaware.
Ascendia Brands, Inc. (Delaware Bankruptcy Lead Case No. 08-11787) is poised to launch a barrage of bankruptcy avoidable, preferential transfer adversary proceedings within the next 2 weeks. Our analysis of the Debtor’s schedules indicates that approximately 140 former suppliers and other trade creditors will be targeted for avoidable transfer recovery under section 547, and there is a maximum theoretical recovery of approximately $21 million.
On June 18, 2010 the U.S. Bankruptcy Court in Delaware authorized the Official Committee of Unsecured Creditors to commence preference actions against creditors of Crucible Materials Corporation (District of Delaware Case No. 09-11582 (MFW)). The system that allows the Committee to sue its own constituents derives from one of the basic tenets of U.S. bankruptcy law… equal treatment among creditors of the same class. For those who will be targeted by these preference claims, the hope is that at least some of the returned money will find its way back in the form of increased distributions to the unsecured creditors. Unfortunately, in all probability, the Committee is suing its own constituents to recover funds under circumstances where none of the recovery will ever be paid to unsecured creditors.
On March 5, 2009 (the “Petition Date”), the Monaco Coach Corporation and 12 related entities[FN1] commenced these cases by filing voluntary petitions for relief under chapter 11 the Bankruptcy Code. As of June 4, 2009, the Debtors closed the sales of their luxury motorhome resort and core manufacturing assets. That same day, the Debtors’ authorization to use cash collateral expired. Without a source of cash to fund post-petition administrative expense, the Debtors quickly moved to convert the cases to Chapter 7. The cases were converted on June 30, 2009.
The Official Committee of Unsecured Creditors appointed in the Crucible Materials Corporation bankruptcy (District of Delaware Case No. 09-11582 (MFW)) filed a motion on June 3, 2010 seeking intermediate derivative standing to pursue avoidance actions aka bankruptcy preference recovery. The Committee acknowledges that avoidance actions are supposed to be handled by a Litigation Trustee
The other shoe in the Fluid Routing Solutions (now know as Carolina Fluid Handling Intermediate Holding Corp.) bankruptcy has finally dropped. On September 14, 2009, slightly more than 5 months from the 363 sale of most it operations, the Debtors filed a motion for an order converting the Debtors’ chapter 11 cases to cases under chapter 7 of the Bankruptcy Code. The motion was granted on September 28, 2009 and the trustee was appointed on October 2, 2008. We have provided a DocSheet for the period after the conversion of the Fluid Routing Chapter 11 to Chapter 7.
For suppliers, this is not the worst of the bad news. The really bad news for suppliers – the only hope of the Debtors’ trustee to avoid administrative insolvency is recovery of $2.5 million in preference claims.