As reflected in the prior post, RGN Group Holdings, LLC, and various of its affiliates (“RGN” or the “Debtors”), which are subsidiaries of Regus, have filed for bankruptcy.  As part of the first-day motions filed by the Debtors, RGN sought approval of proposed termination notification procedures, through its Motion to Approve Interim and Final Orders Establishing Notification Procedures for Lease Termination (the “Lease Termination Notification Motion”).

By way of update, the Court denied the Lease Termination Notification Motion on an interim basis, in light of several objections filed by landlords affected by the motion.  Per the Court order, a hearing to determine whether to grant the Lease Termination Notification Motion on a final basis will be held on September 29, 2020, at 10:00 a.m. (prevailing Eastern Time), with objections due by no later than September 11, 2020, at 4:00 p.m. (prevailing Eastern Time).

In addition, the Debtors have recently sought to reject a lease to which RGN is a counter-party, through their Motion to Authorize (I) the Rejection of a Certain Unexpired Lease, (II) Authorizing the Abandonment of Certain Personal Property, and (III) Granting Related Relief (the “Rejection Motion”).  Per the Rejection Motion, RGN seeks an order rejecting its lease with Merchandise Mart, L.L.C., in Chicago, Illinois.

Under Section 365 of the Bankruptcy Code, a debtor that is a tenant to a lease “may assume or reject” an unexpired lease.  If the debtor rejects the lease, the landlord may assert a “rejection damage” claim against the debtor, which is generally afforded general unsecured priority.

Stay tuned for further updates in the RGN bankruptcy proceedings before the Delaware Bankruptcy Court.

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.

RGN Group Holdings LLC, and certain of its affiliates (“RGN” or the “Debtors”) filed voluntary Chapter 11 bankruptcy petitions in the United States Bankruptcy Court for the District of Delaware on August 17, 2020.

According to court filings, the Debtors are subsidiaries of Regus Corporation, a Delaware corporation that, together with its affiliates offers a network of on-demand office and co-working spaces, and ancillary services and support, to a variety of clients across a host of industries in over 1,000 locations in the United States and Canada. The Debtors operate Regus shared office suites in a multitude of locations.

Per the Declaration of James S. Feltman in Support of the Chapter 11 Petitions and First-Day Relief, Covid-19 has “severely disrupted business plans and operations for certain locations within the company’s U.S. portfolio.  With the near universal adoption of work-from-home policies by U.S. businesses during the early months of the pandemic, demand for temporary office space has been depressed…”  Decl., ¶ 27.  This has impacted the company’s liquidity at the level of the Debtors’ U.S. portfolio.

As part of its first-day relief, RGN has filed a Motion to Approve Interim and Final Orders Establishing Notification Procedures for Lease Termination (the “Lease Termination Motion”).  The Notice Procedures proposed by the Lease Termination Motion, among other things, generally require a commercial landlord to any lease with the Debtors to provide sufficient notice prior to the effective date of any intended action to terminate a lease.  Landlords implicated by the Lease Termination Motion should consult with counsel to determine its impact upon them.

A hearing on the Lease Termination Motion is scheduled for Tuesday, August 25th at 2:00 p.m. before the Delaware Bankruptcy Court.  While in bankruptcy, RGN plans to continue to approach landlords to re-negotiate leases while the automatic stay is in place under Section 365 of the Bankruptcy Code.  Pursuant to the notice filed by the Debtors, objections to the Lease Termination Motion may be filed up to the start of the hearing.

The cases are pending before the Honorable Brendan L. Shannon.  The lead case number is Case No. 20-11961-BLS.

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.

Arandell Holdings, Inc. and its affiliated debtors (“Arandell” or the “Debtors”), a catalog printing services company, recently filed for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware.

According to the Declaration of Bradley J. Hoffman in Support of the Chapter 11 Petitions and First Day Motions, Arandell is a 100 year old commercial printing company, based out of Wisconsin.  Among other things, Arandell had recently experienced substantial issues with its Kentucky plant, which had been abandoned by its prior owners and had been idle for six months leading up to the bankruptcy filing.  In addition, the Debtors had been experiencing significant liquidity issues.

According to the petition for relief, Arandell reports assets in the range of $10 million to $50 million, and liabilities in the range of $100 million to $500 million.  The petition reflects less than 1,000 creditors, and estimates that funds will be available for distribution to unsecured creditors.

The Debtors’ first-day motions were entered by the Court on an interim basis on August 14, 2020.  A final hearing on the first-day motions is scheduled for September 15, 2020 at 1:00 p.m. E.T. before the Delaware Bankruptcy Court, with objections due September 8, 2020.

The lead case number is Case No. 20-11941.  The Debtors’ cases are before the Honorable John T. Dorsey.

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.

Today, the United States Bankruptcy Court for the District of Delaware issued an Order Regarding Service Pursuant to Del. Bankr. L.R. 5005-4 and 9036-1, which directs parties not to serve hard copies of documents that are filed through the CM/ECF system.  Citing the restrictions imposed by the pandemic and restricted access to regular places of business, the Delaware Bankruptcy Court has ordered parties to solely serve documents through email or other electronic means.  The order is effective today, August 14, 2020.  A copy of the order can be found here.

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.

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.

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.

 

Tonopah Solar Energy LLC, the owner of a Nevada solar energy power plant, filed for bankruptcy on on July 30th before the United States Bankruptcy Court for the District of Delaware.  According to its petition, the debtor has between $100 million and $500 million in liabilities.

Tonopah Solar Energy LLC still owes $425 million on a loan from the U.S. Department of Energy, but reached a settlement under which the department will recover at least $200 million, according to documents filed in the Delaware Bankruptcy Court.  The settlement remains subject to court approval.

Tonopah is owned by SolarReserve, the startup that developed the plant; Cobra Energy Investments LLC, a division of Spanish infrastructure company ACS; and Banco Santander SA, according to court papers.  Interestingly, Tonopah just received a written opinion from the Delaware Court of Chancery in its favor earlier in July denying a books and records demand by SolarReserve CSP Holdings, LLC, a holding company established to hold an indirect interest in Tonopah, under the company’s limited liability company agreement.  A recent discussion of the opinion by the Delaware Business Dispute Blog can be found here.

Tonopah began operating in 2015.  However, its facility suffered issues with its energy storage system which caused the power plant to cease operations. Operations resumed in July 2017 and remained online until early April 2019, when a second leak in the tank was discovered. Tonopah has not operated since the first half of 2019.

The Debtor’s case has been assigned to the Honorable Karen B. Owens.

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

IMH Financial Corporation (“IMH” or the “Company”) has recently filed for chapter 11 bankruptcy protection before the United States Bankruptcy Court for the District of Delaware.

IMH is a real estate investment holding company with assets consisting of: (i) the MacArthur Place Hotel & Spa in Sonoma California, (ii) thousands of undeveloped acreage and related water rights outside of Albuquerque New Mexico, (iii) other real estate assets, and (iv) significant tax attributes.

According to the First Day Declaration of Chadwick S. Parson, the Chief Executive Officer of IMH Financial Corporation, IMH has no material secured debt, and no funded unsecured indebtedness. It does not hold significant levels of debt, apart from a small loan and amounts owing to creditors.

JP Morgan is the holder of all of the shares of the Company’s Series A Senior Preferred Stock and has offered a lending facility of $10.15 million. IMH Financial Corporation will draw down $1.9 million from the facility, if approved by the Delaware Bankruptcy Court. Additionally, there is also an exit facility lending agreement up to $71 million to fund the Company’s obligations as part of the restructuring.

Under IMH’s proposed plan, shareholders owning Series B-1 Preferred Stock are projected to receive $8.9 million pro rata. The remaining common stock shareholders, apart from JP Morgan, are estimated to receive between $5 million and $7.5 million. Common stock shareholders are not allowed to sell their shares.

The Company already held a $37 million loan pertaining to a hotel property, The L’Auberge de Sonoma Resort Fund, LLC, which will continue to run in the background of all other restructuring activities. The Company’s remaining portfolio is comprised of over $2 billion of assets, many of them in the hotel industry.

IMH has taken on certain upscale real estate and restaurant projects in recent years. This is one of the sectors most badly affected by the 2020 health crisis.  By filing chapter 11 bankruptcy and obtaining first day relief, IMH intends to salvage its business and reorganize its capital structure.

The bankruptcy case is before the Honorable Christopher S. Sontchi.  The Section 341 meeting of creditors is scheduled for August 18, 2020 at 1:00 p.m.

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

On July 28, 2020, an involuntary bankruptcy petition was filed against SonoCiné, Inc., an imaging ultrasound company.  A copy of the involuntary petition can be found here.  According to the petition, Global Link Medical Group, Inc. possesses a claim against the debtor for over $1.5 million.

Under Section 303 of the Bankruptcy Code, a debtor can potentially be “forced” into an involuntary bankruptcy.  11 U.S.C.§ 303(b)(1).  If a company has 12 or more creditors, an involuntary petition requires three or more creditors whose claims are not contingent as to liability or subject to a bona fide dispute as to either liability or amount to file the petition. If a company has less than 12 creditors, then only one creditor is required to file the petition.

If the involuntary debtor objects to the involuntary filing on a timely basis, for the company to be placed into bankruptcy, there must also be a showing that it is generally not paying its debts as they become due unless those debts are subject to a bona fide dispute as to liability or amount, or that a custodian has been appointed within the past 120 days to take possession or control of substantially all of its assets.

The involuntary bankruptcy petition was filed in the United States Bankruptcy Court for the District of Delaware, Case No. 20-11877.

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

Bruin E&P Partners LLC and its affiliates (“Bruin”), a Houston oil and gas company backed by private equity firm ArcLight, filed for Chapter 11 bankruptcy  protection on July 16, 2020 in the Southern District of Texas. Like other companies in the oil & gas industry, the coronavirus pandemic has reduced global need for fuel and has affected the profitability of energy companies, causing a major disruption to the business.

Through the bankruptcy, Bruin seeks to optimize its balance sheet and restructure its capital in response to a potentially future volatile period in the oil market. The threat of a second wave of global lockdowns and tensions between Saudi Arabia and Russia give rise to uncertainty ahead.

In the detailed liquidation analysis provided in Bruin’s disclosure statement, Bruin shows a potential recovery between $173 million and $226 million. In another exhibit to the disclosure statement, forecast revenue for the following three years is set to fall between $209 million and $152 million.  Expected costs should allow a profitable EBITDA to be achieved, however, the bottom line should be a net loss for each year.  Bruin’s proposed plan of reorganization may be viewed here.

The net loss after tax, depreciation and amortization is mostly due to high depreciation rates. Capital expenditure is forecast in low numbers for cash flow management purposes. Bruin currently has approximately $20 million in cash at banks and intends to keep an identical level of liquidity for the following three years.

Bruin’s filing for chapter 11 bankruptcy is not a last resort but a strategic financial decision as it intends to continue day to day operations. There are no significant changes expected either to top management or the board of directors, and employee obligations should be honored as the company holds sufficient cash for anticipated expenses.

The cases are pending before the Honorable Marvin Isgur and are being jointly administered for procedural purposes under case number 20-33605.

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

Global Eagle Entertainment Inc. filed for bankruptcy in Delaware on Wednesday, July 22, 2020, becoming the latest travel-related bankruptcy during the pandemic.  Global Eagle provides Wi-Fi services to airlines and ships, and plans to turn ownership over to Apollo Global Management Inc. and other lenders.

The debtors receive approximately a fifth of their revenue from Southwest Airlines Co. Global Eagle said it will continue serving customers throughout the bankruptcy proceeding, and plans to emerge from bankruptcy by the end of the year with $475 million less debt.

According to its petition, Global Eagle had approximately $630.5 million in assets and 1,115 employees at the time of the bankruptcy filing. According to the company, its future owners intend to provide a $125 million credit facility as exit financing upon completion of its restructuring.

CFO Christian Mezger stated that the company “had been adversely impacted by the COVID-19 pandemic” as its airline and cruise line partners had ceased or severely reduced their operations. The bankruptcy filing added that demand for Golden Eagle services had “drastically” shrunk, impacting the company’s operations and cash flows.

Global Eagle plans to obtain $80 million in debtor-in-possession financing and expects the financing to provide liquidity to support its operations during the sale process.

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