Below is our initial take on recent bankruptcy-related developments:
Ruby Pipeline LLC, a Houston-based natural gas pipeline, will be starting the Chapter 11 bankruptcy process, but its creditors are skeptical of the company’s lack of plans prepared for the process.
S&K Take: Another large case filed in Delaware. This seemingly pits unsecured noteholders owed approximately $475 million against the Debtors’ equity owners, who could be subject to clawback actions based on commentary at the first day hearing. Equity has placed independent directors tasked with investigating those transactions for the benefit of the estate, putting in place a paradigm familiar to restructuring professionals. Ruby has significant cash on hand to run its case, but not enough to make the payment on the bonds. Stay tuned on this one.
The Chapter 11 plan disclosure statement for bankrupt Limetree Bay Services Ltd. received court approval, but its secured creditors are reluctant to continue funding the case.
S&K Take: Unsecured creditors had filed a motion to dismiss these cases, arguing that there was nothing left to do and no need for a plan. The Debtors had sold their business as a going concern, and proceeds were short of covering the secured debt. Unsecured creditors were not in line for a distribution and did not want preference litigation against them to fund a litigation trust and pad the recoveries of secured creditors. A bargain has seemingly been struck to allow the plan process to proceed.
Bankruptcy filings have started to increase this year with a jump in March filings compared to February.
S&K Take: March was better -- not good, but better -- for restructuring professionals. We saw a few bigger cases, Footprint, MD Helicopter and Ruby Pipeline file in Delaware, which was welcome news. This does not make March a big month by any stretch of the imagination, but it beats January and February, which were two of the slowest months for bankruptcy in memory.
GWG Holdings Inc., an alternative asset manager, is preparing to file for Chapter 11 bankruptcy protection, according to an industry source.
S&K Take: Sounds like another large chapter 11 is on the way. GWG was invested in life settlement transactions, and the capital stack was pretty hefty. We will definitely keep our eyes peeled for this one.
Closing arguments started in the Boy Scouts of America bankruptcy case, following a three-week trial, and Judge Laura Selber Silverstein will decide whether to approve its reorganization plan.
S&K Take: Insurers continue to mount their defense against implementation of claims adjudication procedures which they argue unfairly benefit claimants. There are also some releases at stake here, which will provide another data point on that issue.