Barzel Industries Inc. (“Barzel”) and 7 affiliated entities (”Debtors”) filed petitions on September 15, 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 09-13204. The bankruptcy presents some potential challenges for suppliers at the most fundamental level – the correct identification of the supplier’s customer.
The Debtors’ petitions and the first day motions are supported by the declaration of Karen G. Narwold, Vice President, Strategic Counsel and Secretary of Barzel Industries, Inc. (the “Narwold Declaration”). The Narwold Declaration explains that concurrently with the filings by the Debtors in Delaware, Barzel Industries Canada Inc. (“Barzel Canada”), one of the Debtors’ Canadian affiliates (the “Canadian Debtor”), has filed an application with the Ontario Superior Court of Justice — Commercial List (the “Canadian Court”) under the Companies Creditors Arrangement Act, R.S.C. 1985, c. C-36 (the “CCAA”) seeking protection from its creditors in Canada (the case commenced under the CCAA by the Canadian Debtor, being called the “Canadian Proceedings”).
The Canadian Debtor operations are not independent of the operations of the US Debtors. To the contrary, the Narwold Declaration describes the operations as “highly integrated.” The Narwold Declaration goes on to explain that “All finance, public issuer regulatory matters, treasury, cash management and executive functions for the Debtors and Canadian Debtor are provided by [Barzel].” This integration flags ongoing challenges in coordination of the Canadian Court and Delaware Court proceedings. It also flags potential challenges for suppliers.
From a supplier perspective, the real concern in proper debtor identification arises in the further explanation in the Narwold Declaration of the integrated operations of the Canadian and US entities. The declaration goes on to explain:
In addition, all supply contracts and processing contracts for the benefit of the Debtors and Canadian Debtor are with [Barzel] as the named counterparty.
Just by way of illustration of the problem this presents to suppliers, consider the requirements of Section 503(b)(9). One of these requirements is that the goods have been “received” by the debtor within 20 days of the filing of the bankruptcy. So is the debtor for purposes of 503(b)(9) going to be Brazel Industries or the subsidiary to whom the goods were actually delivered? Since a 503(b)(9) claim is going to have to be affirmatively asserted by the supplier, the supplier might have to pick its poison. This might be a case where being the first to make a 503(b)(9) claim is not a good idea.
In any event, keep in mind that the joint administration of the Debtors’ cases is for procedural purposes only. For substantive purposes, including the exercise by a creditor of any substantive rights, the correct Debtor entity still must be identified. As the first step in assessing this bankruptcy, a supplier, landlord or other unsecured trade creditor should confirm the identity of the entity with whom it contracted. A supplier should also confirm the identity of the actual recipient of any goods and services provided by the supplier.
A listing of the corporate name of each of the Debtors and its case number is provided a table below. Also provided are certain of the trade names identified in the petitions as having been used by the Debtors.
|Debtors||Other Name(s) Used by the Debtor from Petition||Case Number|
|Barzel Industries Inc.||Novamerican Steel Inc.; Symmetry Holdings Inc.||09-13204|
|Barzel Holdings Inc.||Novamerican Steel Holdings Inc.; Lone Star Holdings I Inc.||09-13205|
|Barzel Finco Inc.||Novamerican Steel Finco Inc.; Lone Star Finco Inc.||09-13206|
|Barzel Industries U.S. Inc.||Novamerican Steel U.S. Inc.; Integrated Steel Industries, Inc.||09-13207|
|American Steel and Aluminum Corporation||Steel Sales Realty Company; United Steel and Aluminum Corporation||09-13208|
|Nova Tube and Steel, Inc.||Novatlantic Steel and Tube Corporation||09-13209|
|Nova Tube Indiana, LLC||Bethnova Tube, LLC||09-13210|
|Novamerican Tube Holdings, Inc.||Placements Novamerican Tube, Inc.||09-13211|