In October 2019, Bayou Steel BD Holdings, LLC, and its affiliated debtors (“Bayou Steel” or “Debtors”) filed for bankruptcy before the District of Delaware. By way of background, the company sought protection from creditors after a “severe lack in liquidity” led to a default on its senior secured debt. Bayou, which produces steel products like reinforcing bars and beams, has offloaded much of its remaining inventory and sell its assets during bankruptcy.
Since the bankruptcy filing, Bayou Steel’s bankruptcy case was converted from a Chapter 11 reorganization to a Chapter 7 liquidation and has been taken over by an independent trustee. Judge Karen B. Owens granted the unsecured creditors committee’s motion to convert the case, because Bayou Steel was administratively insolvent. This means that the Debtors may lack the means to pay priority and post-bankruptcy claims.
Relatedly, a Notice of Deadline for Request for Payment of Certain Administrative Expense Claims Pursuant to 11 U.S.C. Section 503(b). Pursuant to the Notice, the deadline to file requests for payment pursuant to section 503 of the Bankruptcy Code is September 10, 2020 at 5:00 p.m. (Prevailing Eastern Time). Accordingly, any creditor seeking to submit a claim against the Bayou Steel should timely submit a claim by then.
Administrative expense claims are actual and necessary costs and expenses involved in preserving the value of a bankrupt entity’s estate. Section 503(b)(1)(A) of the Bankruptcy Code involves administrative expense claims consisting of wages, salaries, and commissions for services rendered to the bankrupt entity.
Section 503 of the Bankruptcy Code authorizes payment of administrative expenses before other kinds of obligations owed by an entity operating in bankruptcy because, generally speaking, administrative expenses are critical to preserving the estate’s value and therefore benefit the creditors.