All items from Delaware Bankruptcy Litigation

The Supreme Court Weighs in on Credit-Bidding

On May 29, 2012, the United States Supreme Court issued an opinion in the Radlax Gateway Hotel bankruptcy proceeding regarding the viability of a plan of reorganization that prohibited a bank from credit-bidding on the debtors’ assets.  See Radlax Gateway Hotel, LLC, et al., v. Amalgamated Bank, __S.Ct.__ No. 11-166, 2012 WL 1912197 (U.S. May 29, 2012)(hereinafter “Opinion at * ___”).  The debtors in Radlax (“Debtors”) purchased a hotel at the Los Angeles International Airport, along with an adjacent property. Debtors intended to renovate the hotel and develop the adjacent lot into a parking garage.  Opinion at *1.  Things did not go as planned for the Debtors.  The costs to develop the garage were greater than originally expected.  Debtors were $120 million in debt to their lenders and out of funds needed to complete the project.  Opinion at *2.  Soon thereafter, Debtors filed chapter 11 petitions for reorganization in the United States Bankruptcy Court for the Northern District of Illinois.  Id.



From Delaware Bankruptcy Litigation
Posted 39 weeks 4 days ago

Court Applies Divestiture Rule in New Century Bankruptcy Proceeding

Earlier this summer, the Delaware Bankruptcy Court issued an opinion in the New Century Holdings bankruptcy addressing the definition and purpose of the "Divestiture Rule."  See Carr v. New Century TRS Holdings, Inc. (In re New Century TRS Holdings, Inc.), Adv. No. 09-52251(KJC)(Bankr. D. Del. June 7, 2012)(hereinafter "Opinion at *___").  Under the Divestiture Rule, an appeal from a bankruptcy court order divests the lower court of any further jurisdiction over the subject of the appeal.  Opinion at *4, citing In re Whispering Pines Estates, Inc., 369 B.R. 752, 757 (1st Cir. BAP); In re Washington Mutual, Inc., 461 B.R. 200, 217-18 (Bankr. D. Del. 2011).  In New Century, a former borrower (the "Borrower") filed an adversary proceeding against New Century (the "Debtor") alleging various lender liability claims.  The parties eventually reached a settlement resolving the adversary proceeding. Opinion at *2. 



From Delaware Bankruptcy Litigation
Posted 40 weeks 16 hours ago

Tri-Valley Corporation Files for Bankruptcy in Delaware

Earlier this month, Tri-Valley Corporation and various affiliates (collectively "Tri-Valley" or "Debtors") filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  This post will look briefly at Tri-Valley's business, why the company filed for bankruptcy as well as Tri-Valley's objectives while in bankruptcy.
On the same day that Tri-Valley filed petitions for bankruptcy, the company filed with the Bankruptcy Court what are commonly referred to as "first day motions."  Tri-Valley also filed a declaration of its President and CEO in support of its first day motions and applications (the "Declaration" or "Decl.").  As stated in its Declaration, Tri-Valley describes itself as a crude oil and natural gas exploration, development and production company. Decl. at *2.  The company also explores parts of Alaska for precious metals.  Id.



From Delaware Bankruptcy Litigation
Posted 40 weeks 3 days ago

A Preference Reference: Common Issues That Arise in Delaware Preference Litigation

We recently finished "A Preference Reference:  Common Issues that Arise in Delaware Preference Litigation."  Delaware has such a high volume of preference litigation, we thought it might be helpful to put together a brief publication that addresses the elements and common defenses to avoidable preference claims.  We wrote the booklet in a format that hopefully is helpful to attorneys and non-attorneys alike. A copy of the "Preference Reference" is available here for review.   



From Delaware Bankruptcy Litigation
Posted 43 weeks 16 hours ago

What are the Scope and Limitations of a Rule 2004 Examination?

Federal Rule of Bankruptcy Procedure 2004(a) states that "[o]n motion of any party in interest, the court may order the examination of any entity."  Courts construing Rule 2004(a) have found its scope "unfettered and broad."  In re Washington Mutual, Inc., 408 B.R. 45, 49 (Bankr. D. Del. 2009), citing In re Bennett Funding Group, Inc., 203 B.R. 24, 28 (Bankr. N. D. N.Y. 1996).  Federal Rule of Bankruptcy Procedure 2004(b) establishes some of the parameters of what is commonly referred to as a "Rule 2004 Examination":
The examination ... may relate only to the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate.  [Additionally, in a] case under chapter 11 ... the examination may also relate to the operation of any business and the desirability of its continuance, the source of any money or property acquired or to be acquired by the debtor for purposes of consummating a plan and the consideration given or offered therefor, and any other matter relevant to the case or to the formation of a plan.



From Delaware Bankruptcy Litigation
Posted 43 weeks 1 day ago

Gaming Manufacturer, GameTech International, Files for Bankruptcy in Delaware

Earlier this month, GameTech International, Inc., and various related entities (collectively, "GameTech"), filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. According to GameTech's Declaration in Support of its Chapter 11 Petitions (the "Decl."), the company entered the electronic bingo business in 1994  and the video lottery terminal ("VLT") and slot machine business in 2007.  Decl. at *5.   Based in Reno, Nevada, GameTech is a Delaware corporation that was incorporated in 1994.  GameTech also does business under GameTech Canada, a Canadian corporation and GameTech Mexico, a Mexican corporation.  Decl. at *3. 
The bingo segment of GameTech's business leases electronic bingo equipment and licenses operating software throughout the U.S. and Canada.  The company generates revenue through leasing and licensing fees with nonprofits, Native American tribes, casinos and other users of its equipment and software.  As for its VLT business, GameTech produces slot machines, video poker and other games and software.  Decl. at *3.  GameTech's total revenue for 2011 exceeded $30 million.  The company expects revenues to drop in 2012 and then increase again in 2013.  Id.



From Delaware Bankruptcy Litigation
Posted 44 weeks 1 day ago

Northstar Aerospace Files for Bankruptcy in Delaware Due to Negative Profits, Decreased Defense Spending and Lack of Funding

In June, Northstar Aerospace and various related entities (collectively, "Northstar") filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  Northstar describes itself as a supplier of "components and assemblies for the commercial and military aerospace markets."  The company also provides machining, repair and overhaul services for the aerospace industry.  See Northstar's Declaration in Support of First Day Motions (the "Decl.") at *3.  The company enters bankruptcy following a marketing process for the sale of its business.  Id.  By filing for bankruptcy, Northstar hopes to continue with operations while the company finds a buyer.  Decl. at *4.  A copy of Northstar's bankruptcy petition is available here for review.  Click here to review a copy of Northstar's Declaration in Support of First Day Motions. 



From Delaware Bankruptcy Litigation
Posted 44 weeks 2 days ago

Delaware Bankruptcy Court Finds Bonus Plan Was Created in the Ordinary Course of Business

On July 9, 2012, Judge Peter J. Walsh of the United States Bankruptcy Court for the District of Delaware issued a memorandum opinion (the "Opinion"), in the Blitz U.S.A. bankruptcy proceeding addressing whether an employee bonus plan is a transaction made in the ordinary course of business under 11 U.S.C. 363(c)(1).  The court issued the Opinion after considering Blitz's motion seeking authorization to make payments associated with an employee bonus plan (the "Motion").  The Official Committee of Unsecured Creditors (the "Committee") objected to the Motion, arguing that the bonus plan was not an ordinary course transaction and did not meet the heightened requirements under 11 U.S.C. 503(c)(3)(prohibiting a debtor from making payments outside the ordinary course of business that are not justified by the "facts and circumstances of the case.")  Opinion at *3; 11 U.S.C. 503(c)(3). 



From Delaware Bankruptcy Litigation
Posted 44 weeks 3 days ago

Low Steel Prices, High Commodity Prices and a Lack of Cash Force RG Steel to File for Bankruptcy

On May 30, 2012, RG Steel, LLC and various related entities (collectively "RG Steel" or "Debtors") filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  According to the Declaration of the company's CFO (the "Decl."), RG Steel enters bankruptcy as the fourth largest flat-rolled steel company in the United States.  At full capacity,  the company can produce 8.2 million tons of steel per year.  Decl. at 2.
Based in Sparrows Point, Maryland, RG Steel operates steel producing facilities in Maryland, Ohio and West Virginia.  RG Steel was formed in March 2011 as the result of a stock purchase agreement with Severstal U.S. Holdings II, Inc., and various related entities (collectively, "Severstal").  Decl. at *5.  RG Steel's acquisition of Severstal required Severstal to deliver $450 million in net working capital at closing. After the acquisition, however, RG Steel asserted an $82 million claim against Severstal.  According to RG Steel, this "working capital shortfall" brought on by "Severstal's misrepresentations has greatly exacerbated the company's liquidity problems, which ultimately culminated in the commencement of these cases."  Decl. at *6.  In addition to the capital shortfall claim, RG Steel also brings claims against Severstal for breach of representations, warranties and indemnification.  Decl. at *6.



From Delaware Bankruptcy Litigation
Posted 44 weeks 6 days ago

Ritz Camera Files for Bankruptcy in Delaware ... Again

On June 22, 2012, Ritz Camera & Image, LLC, and various related entities (collectively, the "Debtors" or "Ritz II"), filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware.  Those familiar with Ritz Camera know that the company's predecessor, Ritz Camera Centers, Inc. ("Ritz I") previously filed petitions for bankruptcy with the Delaware Bankruptcy Court in February 2009.  Ritz II, which was originally owned by David Ritz, members of the Ritz family, and other investors, was the successful bidder at Ritz I's bankruptcy auction. 
According to the Declaration of Debtors' Chief Restructuring Officer (the "Decl."), Ritz II is the largest specialty camera and image chain in the United States.  The company operates 265 stores in over 30 states.  Decl. at *3.  Debtors also own Ritz Interactive, LLC ("Ritz Interactive").  Debtors describe Ritz Interactive as an "e-commerce network of interactive websites including RitzCamera.com, WolfCamera.com, BoatersWorld.com, CameraWorld.com, PhotoAlley.com, eAngler.com, ScrapbookingAlley.com, NeedleCraftsEtc.com, CeilingFansandMore.com, and ShotAtShark.com."  Ritz Interactive is set-up so that it fills most of its online customer orders by purchasing inventory from the Debtors.  Ritz Interactive's annual revenue for FY 2011 totaled approximately $36 million, whereas Ritz II's annual revenue totaled approximately $254 million.  Decl. at *4-5. 



From Delaware Bankruptcy Litigation
Posted 45 weeks 16 hours ago