When is an asset of a debtor’s non-bankrupt affiliate also an asset of the debtor’s estate? The latest answer to this question comes to us from the District Court for the Western District of Texas (Waco Division) in In re Simons Broadcasting, LP. And it presents us with a fact pattern that’s bigger than Dallas!
The Simons saga begins with the prepetition relationship among (i) the debtor, Simons Broadcasting, LP, (ii) its non-profit affiliate, Promiseland Television Network, Inc., and (iii) their shared founder, manager, and principal (one individual). Simons owned and operated KTAQ, a television station in the Dallas-Fort Worth area. Promiseland’s main purpose involved promoting and selling airtime to religious organizations and commercial advertisers, as well as distributing programming via satellite and internet channels. Several years before Simons’ bankruptcy, Promiseland and Simons became parties to a lease whereby Promiseland, in exchange for monthly payments, was given the exclusive right to lease all of the airtime on KTAQ. The sole signatory to the lease agreement was their shared principal in his respective capacity for each entity. Shortly before Simons filed for bankruptcy, the principal amended the lease agreement so as to reduce the payment amounts due by Promiseland to Simons (although the reduction was never put in writing).