Articles tagged with: Section 363 Sale

Articles, notes, other materials on debtor sales of assets using Section 363 of the Bankruptcy Code and impact on trade, other unsecured creditors

27 Automotive Suppliers File Chapter 11 Bankruptcies in 2009; End of Year Status Summary; Likelihood of Bankruptcy Preference Recovery

Pressures in the global automotive industry forced 27 FN1 automotive parts and component manufacturers and 2 automakers to seek Chapter 11 bankruptcy protection in 2009.  The number of filings is only the headline of the story.  While estimated trade creditor distributions on prepetition claims swung the spectrum of 100% to 0%, estimated recoveries of less than 2 percent predominate.  And more trade creditor pain looms in several bankruptcies, as bankruptcy preference action recoveries are either included in liquidation budgets, are necessary to avoid administrative insolvency or are likely to be sought by plan administrators and liquidation trustees.

This article provides a comprehensive list of the 27 automotive supplier Chapter 11 bankruptcies in 2009, together with status at the end of 2009, estimated trade creditor recoveries and the potential for avoidance actions.

Grede Foundries – Preference Claims, 503(b)(9) Claims Opposition Precede 363 Sale

December 22, 2009 Update:  On December 21, 2009, Grede Foundries filed the affidavit of Eric W. Ek  in support of the  of the Debtor’s motion to authorize the sale of assets.  The affidavit provides both additional background and updated information regarding the proposed Section 363 Sale to Wazata Opportunity Fund II, LLC, through its subsidiary, Iron Operating, LLC.  The affidavit reveals that there was an alternative bidder at the auction.

Fountain Powerboats Bankruptcy – 363 Sale Credit Bid Rejected, Proposed DIP Financing Motion Approved

See the Fountain Powerboats Docsheet Report for subsequent developments in the Fountain Powerboats bankruptcy proceedings.

Following five and a half hours of testimony and final argument, Judge Randy D. Doub of the Bankruptcy Court for the Eastern District of North Carolina ruled on October 9, 2009 that the proposed Section 363 sale credit bid of Oxford Financial Group (“Oxford”) for the operating assets of Fountain Powerboat Industries, Inc. (“Fountain Powerboats”) was not in the best interest of the Debtor’s estate.  The court instead approved a motion for Fountain Powerboats to obtain debtor in possession  financing from Liberty Associates for an amount up to and including $1.5 million.

Pittsburgh Tube – PTC Alliance Bankruptcy – Debt Picture and Largest Unsecured Creditors

PTC Alliance Corp. d/b/a Pittsburgh Tube Company (“Pittsburgh Tube”) and its 6 affiliates who also filed bankruptcy on October 1, 2009 (the “Debtors”) have filed a consolidated list of the 30 largest unsecured creditors (the “Top Unsecured Creditor List”).  The total of claims of the 30 top unsecured creditors is substantial, exceeding $3.9 million.  All of the top 30 unsecured creditors are listed as trade creditors.  The vast majority of the top unsecured creditors are material providers and subcontractors.

With no essential supplier or other motion for payment of any pre-petition supplier claims, a first day motion to restrict exercise of reclamation and 503(b)(9) rights and a planned 363 sale to an insider, this is shaping up to be a bloody ugly bankruptcy from a supplier perspective.

Fountain Powerboats Seeks Bankruptcy Direction Sea Change – Reorganization Not 363 Sale

Fountain Powerboat Industries, Inc. and its 3 co-debtor affiliates (collectively the Debtors ) have moved Bankruptcy Court for the Eastern District of North Carolina (the “Court”) to authorize the Debtors to postpone the pre-ordained section 363 sale.  This is a U-turn for the Debtors who had pushed for a rapid 363 sale citing fears that a delay could result in the Debtors running out of money to fund operations.  The two fold reason for the turnaround – a probable credit bid by a recent acquirer of the pre-petition secured lender’s position and a potential white knight offer to provide debtor in possession (“DIP”) and exit financing.  This may be good news for the suppliers and vendors who have nearly $1.8 million in pre-petition trade claims.

Velocity Express Bankruptcy – Debtors, Petitions, Background Information

Velocity Express Corporation (“Velocity Express”) and 12 affiliated entities (“Debtors”) filed petitions on September 24, 2009 in the Bankruptcy Court for the District of Delaware for relief under Chapter 11 of Title 11 of the United States Code.  The Debtors have moved for joint administration of the Debtors’ cases under case number 09-13294.  The Debtors’ petitions and the first day motions are supported by the declaration of Vincent A. Wasik, Chief Executive Officer (the “Wasik Declaration”).  The Wasik Declaration clearly identifies the direction of the bankruptcy – the immediate rejection of facility leases and a quick 363 sale.

363 Sale Plans Resurface in Grede Foundries Bankruptcy; Will this Bankruptcy be Different?

The Grede Foundries Official Committee of Unsecured Creditors (the “Committee”) confirmed on September 17, 2009 what only had been implied in other filings and indicated by a few of the Debtor’s maneuvers over the past several weeks – the Debtor is planning to sell all or a substantial portion its operations under Section 363 of the Bankruptcy Code.  In an objection to Debtor’s motion to engage an executive headhunter, the Committee’s counsel stated:

The Committee is informed and believes that the Debtors intend to sign a stalking horse asset purchase agreement and file a motion for approval of sale procedures before the end of September, and to have the stalking horse bidder and sale procedures approved by mid-October.

The Committee went on to state that DDJ Capital Management, LLC (“DDJ”), the spoiler of Wayzata Opportunity Fund II, L.P. 363 sale plans, was one of the “the serious potential stalking horse bidders… .”

Fluid Routing Solutions – Bankruptcy to Convert to 7, Preference Claims Coming

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.

Stant Bankruptcy 363 Sale; Have and Have Not Suppliers

The Stant bankruptcy is structured as a 363 Sale to an affiliate of an insider (i.e. a current equity holder).  For suppliers this will be a case of suppler “haves” and supplier “have nots”.  Each supplier should determine its classification as soon as possible.  This bankruptcy likely will move fast – 45 days and the 363 sale will be done.  Based on the limited financial information provided to date, administrative insolvency is a risk.  So for some suppliers who don’t pay attention, this may be a bankruptcy that just keeps on giving.

DDJ Capital Derails Grede Foundries and Wayzatas Fast Track 363 Sale Strategy

DDJ Capital Management, LLC (“DDJ”) has thrown its money in front of the Grede Foundries fast track, 363 sale bankruptcy strategy.  Grede Foundries planned a “fast-paced” section 363 sale to a new venture backed by the private equity fund Wayzata Opportunity Fund II, L.P. (“Wayzata”). DDJ has achieved a critical fist step in keeping the 363 sale from gaining momentum. DDJ has stepped in with DIP financing.