Preferred Communication Systems, Inc. (“PCSI” or “Debtor”) filed for chapter 7 bankruptcy before the United States Bankruptcy Court for the District of Delaware on July 28, 2021.

This bankruptcy proceeding constitutes a rare example of a debtor listing more assets than debt.  Per PCSI’s Schedules, the Debtor lists approximately $1.1 million in assets, and 607K in liabilities.  The majority of PCSI’s assets are comprised of a 2014 federal tax refund in the approximate amount of 844K.

The Section 341 meeting for PCSI is scheduled for August 25, 2021 at 10:00 a.m. via phone.  George L. Miller has been appointed as the Chapter 7 Trustee to the case.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.

Earlier this month, on July 8, 2021, Pipeline Foods, LLC and its affiliated debtors (“Pipeline”) filed for Chapter 11 protection in the United States Bankruptcy Court for the District of Delaware.  The debtors’ bankruptcy cases are jointly administered before the Honorable Karen B. Owens under Case No. 21-11002.

Pipeline’s Chief Executive Officer, Anthony Sepich, stated: “[t]he impact of the Coronavirus (COVID-19) pandemic coupled with the Company’s secured debt obligations have caused significant financial distress on our business.  As a result, we believe that a bankruptcy filing and a potential sale of the business, portions of the business, and certain of its assets is the best path forward to unlock value for the benefit of all creditors.”

Headquartered in Minneapolis, Minnesota, Pipeline has expanded through acquisitions over the past several years, including the acquisition of Organic Ventures, an ancient grains and specialty products business.

Pipeline’s strategy in the bankruptcy is to continue its operations, including operating within a cash collateral budget to pay employee wages and benefits without interruption and to use cash collateral.  Pipeline will also evaluate strategic alternatives, including a sale of its assets to maximize recovery for its creditors.  In this vein, Pipeline has requested authority to sell its commodities inventory by private sales outside of the ordinary course of business to facilitate the company’s use of cash collateral.  A hearing to consider this requested relief is scheduled for July 30, 2021.

Pipeline is represented by Saul Ewing Arnstein & Lehr, LLP, and the claims agent for Pipeline is Stretto.  Barnes & Thornburg LLP represents the Official Committee of Unsecured Creditors, which was formed on July 22, 2021.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.

Recently, on July 13, 2021, the Chief Judge of the United States District Court for the District of Delaware issued a Revised Standing Order lifting the requirement that face masks be worn in public areas of the courthouse by those who are fully vaccinated against COVID-19.  The Revised Standing Order impacts each of the courthouses of the District of Delaware and the Delaware Bankruptcy Court.  Per the standing order, judges retain the ability to require the use of masks within their courtrooms as they see fit.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.

On April 6, 2021, J. Kate Stickles was sworn in as the newest judge of the United States Bankruptcy Court for the District of Delaware.  Judge Stickles becomes the latest judge to join the Delaware Bankruptcy Court since Judges John T. Dorsey and Karen B. Owens were sworn onto the bench in 2019.

Judge Stickles has thirty years of experience, previously working for Cole Schotz P.C. and Saul Ewing LLP.  According to an Announcement issued by the Delaware Bankruptcy Court, Judge Stickles represented “debtors, creditors, official committees, examiners, post-confirmation trustees and other interested parties in Chapter 11 proceedings”, and has been recognized as a leading bankruptcy practitioner in Chambers USA since 2010.

The recent appointment of Judge Stickles brings the total number of judges in the Delaware Bankruptcy Court to seven.  Judge Stickles replaces former Judge Kevin J. Carey, who retired in 2019 and now works with the firm of Hogan Lovells. The Delaware Bankruptcy Court is one of the most active bankruptcy courts in the nation, leading the country in Chapter 11 filings in 2020.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.

Starting on February 18, 2021, Insys Liquidation Trust (“Insys Trust”), the liquidation trust appointed by the United States Bankruptcy Court for the District of Delaware to prosecute claims on behalf of Insys Therapeutics, Inc., filed approximately 53 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548, 549 and 550 of the Bankruptcy Code, along with the disallowance of claims under Section 502(d) of the Bankruptcy Code.

By way of background, on June 10, 2019, Insys Therapeutics, Inc. and its affiliated companies (collectively, the “Debtors”) filed petitions in the United States Bankruptcy Court for the District of Delaware seeking relief under chapter 11 of the United States Bankruptcy Code. The Insys Trust was appointed to prosecute avoidance action claims on behalf of the estate.

The Insys Trust filed a Motion for an Order Establishing Streamlined Procedures Governing Adversary Proceedings Brought by Plaintiff Pursuant to Sections 502, 547, 548, 549 and 550 of the Bankruptcy Code (“Procedures Motion”).  Through the Procedures Motion, the Insys Trust has proposed procedures to govern mediation, pretrial conferences and discovery in each of the adversary proceedings filed in the Insys bankruptcy proceeding.

For a primer on various defenses that can be raised in response to avoidance actions filed to seek the recovery of transfers under Section 547 of the Bankruptcy Code, the following article is a helpful read: A Primer on Defenses to Bankruptcy Preference Claims.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.

Another energy company has succumbed to bankruptcy in the wake of the Covid-19 pandemic.

Nine Point Energy Holdings, Inc., a private exploration & production company focused on the Williston Basin, and its affiliates, including Foxtrot Resources LLC, filed for chapter 11 protection in the United States Bankruptcy Court for the District of Delaware, on March 15, 2021.  The Chapter 11 petition states that the company’s liabilities are between $100 million and $500 million.

The Denver-based oil and gas company plans to enter into an agreement for debtor-in-possession financing and a stalking horse credit bid, which the debtors anticipates to come from their secured lenders.

Nine Point was founded in 2017, and currently operates 205 oil and gas wells, which are largely located in the Williston Basin oilfield in North Dakota.  The predecessor of Nine Point, Triangle Petroleum Corporation, previously filed for chapter 11 bankruptcy protection in Delaware in 2016.

A first-day hearing is scheduled for March 17, 2021 at 2:00 p.m. to consider the Debtors’ first-day motions.  The case is assigned to the Honorable Mary F. Walrath, case no. 21-10570.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.

Champion Property Holdings, LLC and Anglin Cultured Stone Products LLC (“Debtors”) each filed for Chapter 11 bankruptcy protection with the Delaware Bankruptcy Court on February 10, 2021.

According to Debtors’ Petitions, their assets total between $100k – $500k, and their liabilities total between $1 million and $10 million.

A Subchapter V Trustee was appointed to the action.  A Subchapter V Trustee is generally responsible for facilitating a repayment plan and reaching a resolution with creditors. If there is a dispute, the trustee can operate in a manner that is similar to a mediator, to attempt to resolve disputes with creditors.

The Chapter 11 cases are assigned to Judge Dorsey.  The law firm of Gellert Scali Busenkell & Brown LLC represents the Debtors.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.

Wardman Hotel Owner LLC (“Wardman” or “Debtor”) filed for Chapter 11 bankruptcy on January 11, 2021, ending its management contract with Marriott International. The Chapter 11 petition was filed in the U.S. Bankruptcy Court for the District of Delaware.

The Wardman Park, one of the largest hotels in Washington, D.C. with 1,152 rooms, opened in 1918, during the Spanish Flu pandemic.

According to the Debtor’s chapter 11 petition, Wardman reports $100 to $500 million in both assets and liabilities.

Pursuant to the Debtor’s First Day Declaration, Wardman intends to conduct a sale of substantially all of its assets and wind down its remaining operations.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.

The Consolidated Appropriations Act, 2021 (“CAA”) was signed into law on December 27, 2020.  As mentioned in this prior post, the CAA contains many amendments to the Bankruptcy Code which impacts creditors and other interested parties to a bankruptcy proceeding.

One such amendment impacts section 366 of the Bankruptcy Code.  Under Section 366 of the Bankruptcy Code, a debtor must provide adequate assurance of performance to the utilities provider in order to continue receiving utilities during the court of the bankruptcy case.  Section 366(b) states:

Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.

11 U.S.C. § 366(b).

In other words, prior to the enactment of the CAA, a utility provider may discontinue utility services to an individual debtor who failed to provide adequate assurance of payment during the bankruptcy case. “Assurance of payment” is defined in Section 366(c)(1)(A) of the Bankruptcy Code.

The CAA amends Section 366 of the Bankruptcy Code to prevent a utility provider from discontinuing utility services to an individual debtor provided that the individual debtor continues to pay all other post-petition utility payments, even if no adequate assurance of payment was provided.

The text of Section 366(d), the additional provision added to the statute by the CAA, is set forth below:

(d) Notwithstanding any other provision of this section, a utility may not alter, refuse, or discontinue service to a debtor who does not furnish adequate assurance of payment under this
section if the debtor—
(1) is an individual;
(2) makes a payment to the utility for any debt owed to the utility for service provided during the 20-day period beginning on the date of the order for relief; and
(3) after the date on which the 20-day period beginning on the date of the order for relief ends, makes a payment to the utility for services provided during the pendency of case when such a payment becomes due.

This provision sunsets in one year, December 27, 2021.

RELATED: Amendments to the Bankruptcy Preference Statute in the Consolidated Appropriations Act, 2021.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.

On December 27, 2020, the much-anticipated Consolidated Appropriations Act, 2021 (“CAA”) was signed into law.  The CAA contains several COVID-19-related amendments to the United States Bankruptcy Code, 11 U.S.C. §§ 101, et seq. (“Bankruptcy Code”), which may impact many types of creditors. The “Bankruptcy Relief” amendments are set forth in Title X of the CAA.

The CAA contains several amendments of significance to creditors, which will be discussed in subsequent posts. This post will focus on the CAA’s amendment to Section 547 of the Bankruptcy Code, which governs the recovery of so-called preferential transfers made in the 90 day period proceeding a bankruptcy filing for the benefit of a debtor’s estate (or one-year period for an insider).

RELATED: A Primer to Defenses Raised in Bankruptcy Preference Claims.

Preference Statute Amendments

The CAA amends the preference statute of the Bankruptcy Code, Section 547, to prohibit a debtor or trustee from avoiding payments made by a debtor during the preference period for “covered rental arrearages” and “covered supplier arrearages.”  This amendment may apply to landlords of nonresidential real property and suppliers of goods and services.

In order to qualify: (i) the debtor and the counterparty must have entered into a lease or executory contract before the bankruptcy filing; (ii) the parties must have amended the lease or contract after March 13, 2020; and (iii) the amendment to the lease must have deferred or postponed payments otherwise due under the lease or contract.

The bankruptcy preference statute exemption does not apply to the following types of payments: fees, penalties, or interest imposed in the post-March 13, 2020 amendment.

This provision sunsets two years after the enactment of the CAA, but the provisions will continue to apply to bankruptcy cases filed before the sunset date.

Stay tuned for further updates on the CAA’s amendments to the United States Bankruptcy Code.

Carl D. Neff is a partner with the law firm of FisherBroyles, LLP, and practices in Delaware. You can reach Carl at (302) 482-4244 or at Carl.Neff@FisherBroyles.com.