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Managing Management and Employment/Labor Issues in Bankruptcy
This session will examine three issues: (1) the role of management in § 363 sales (how to make sure that management plays the role of neutral stakeholder throughout the plan and/or § 363 process; what actions management might tend to take when it favors a particular bidder in the process; what happens when management wants to participate in the § 363 process); (2) managing management’s interests, including participation in the bankruptcy process (how to address management’s sometimes parochial concerns and keep them from adversely impacting the bankruptcy; the interplay between management’s desires and the desires of the fulcrum class as new owners post-restructuring; issues around management compensation (e.g., employment contracts, incentive plans, severance policies), including the assumption or rejection of existing contracts, plans or policies and/or the implementation of new ones and U.S. Trustee objections; who represents management and when management should look to cut its own deal); and (3) labor issues (issues around benefit plans; whether § 1113 is the only way to eliminate a successor clause (A&P); whether § 1113 is an option if the collective bargaining agreement expires or is expired (Hostess, Trump, Journal Register); whether the union has a claim for damages if rejection relief under § 1113 is granted).
Corporate Governance in Distress Situations
This panel will discuss what strategies sponsors are using to retain control (or at least a stake) through the bankruptcy process, as well as the risks to sponsors, such as fiduciary duties; use of special committees as sword and shield; related-party transactions; sponsor affiliates purchasing debt in the portfolio company’s capital structure, as well as 10b-5 compliance; and selling or spinning off assets/business units (Caesars, Cengage, Nine West, PetSmart, Sears, Toys).
How to Value Debt
There are two common scenarios in which the valuation of a company’s debt securities might need to be assessed. If the consideration under a bankruptcy plan includes debt, how do we determine whether that debt will trade at par, and what disclosure is required? If a buyer in a § 363 sale proposes to issue debt as payment, how should this be valued? Are the considerations the same in these two scenarios?
Recent Confirmation Developments
Get up to date on recent confirmation developments, including cram-ups/reinstatements since Momentive, including the Momentive remand trial; excising third-party releases from a confirmed plan (In re Thru Inc.); nonconsensual releases (Seaside Engineering); vote-designation (Fagerdala (in which a secured lender purchased sufficient unsecured claims to block plan confirmation (9th Cir.)), LightSquared); classification (Novinda (in which litigation claims against a creditor justified separate classification from other unsecureds (10th Cir. BAP))); per plan vs. per debtor (Transvest, Charter, Tribune); and whether all similarly situated creditors should have the right to participate in rights offerings, financings, etc. (PacDrilling).
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