Increasing instances of administrative insolvency, especially in the automotive sector, have caused many suppliers to question the value of 503(b)(9) claims. Even when administrative expense claims are impaired, however, 503(b)(9) claims can be worth substantially more than their face amounts in settlements of bankruptcy preference claims. Seldom do you see in one case, much less in one settlement order, the absolute worst and among the best examples of using this strategy. A recent settlement order in the Cadence Innovation bankruptcy provides this rare opportunity.
The Six Flags debtors (the “Debtors”) have sought only limited relief for suppliers as part of their first day motions. The Debtors estimate that they owed approximately $17 million for goods and services when the bankruptcy petitions were filed. However, the Debtors seek initial authority to pay critical vendor claims in an amount not to exceed $604,543, Section 503(b)(9) claims in an amount not to exceed $4,043,780 and claims of foreign vendors, shippers and warehousemen and potential lien claimants in the approximate amount of $1,408,000. This means that suppliers holding about $11 million in trade debt will have to wait to see if there are any distributions at the end of this bankruptcy.
While the limited amount of the critical supplier relief sought is disappointing, it is not surprising.
For any supplier and other bankruptcy creditor in the bankruptcy of Contech U.S., LLC , timely and properly filing an administrative expense claim under 11 USC § 503(b)(9) may provide the only prospect for payment of any portion of the creditors prepetition claims. Click this link for an article on this site discussing 503(b)(9), including answers to the most common questions regarding making these claims.
Feb. 08, 2009 – Through two “First Day Motions”, Fluid Routing Solutions, Inc. and its affiliated filers (“Fluid Routing Solutions”) are taking steps to hold their own supplier base in place and avoid disruption to its manufacturing operations. The two motions are:
- Motion for Order Pursuant to Sections 105(a), 503(b), and 507(a) of the Bankruptcy Code Authorizing Debtors to Pay Certain Prepetition Claims of Suppliers and Vendors of Goods and Services Entitled to Administrative Priority
- Motion for Order Pursuant to Sections 105, 363 and 506(b) of the Bankruptcy Code for an Order Authorizing the Debtors to Elevate Certain Prepetition Claims of Certain Critical Vendors to Administrative Priority
This post addresses the first of these motions.
We have included a simple sample of Motion for Allowance of Administrative Expense Claim Pursuant to 11 U.S.C. Section 503(b)(9). You can access this sample by clicking the preceding link.
We stress that this is a sample and a simple one at that. There are several ancillary provisions that could be included depending upon the circumstances of a particular case.
We provide an extensive discussion Section 503(b)(9) administrative expense request process in the article: Bankruptcy Creditor 503(b)(9) Administrative Expense
11 USC Section 503(b)(9) provides that a supplier shall be entitled to an “administrative expense claim” for “the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor’s business.”
Clearly motivated by Cadence’s announcement that it is liquidating, suppliers are making sure that they are in line for allowance of administrative expense claims pursuant to