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vol 19, num 2 | September 2020 |
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Beware of Quarterly Fees: Statutory Amendment Increasing Fees May Apply to Pending Cases |
Could your chapter 11 debtor survive if its quarterly fees increased by 833%? That may be an issue for counsel to consider following the January 9, 2020, ruling in the case of Exide Technologies. Although the bankruptcy case was filed in 2013, the bankruptcy court for the District of Delaware found that the 2017 amendment to 28 U.S.C. §1930(a)(6)(B) applied to cases pending at the time of the amendment. What can we learn from this case?
Exide Technologies (Exide) filed chapter 11 on June 10, 2013. Exide's plan of reorganization (the Plan) was confirmed on March 27, 2015, and became effective on April 30, 2015. The Plan provided for the debtor to continue to pay fees pursuant to 28 U.S.C. §1930 until the case closed. On October 26, 2017, Congress amended 28 U.S.C. §1930(a)(6)(B) (2017 Amendment) to read:
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Shaken, Not Stirred: Bondholders and Other Unsecured Claims In PG&E’s Chapter 11 Case Awarded Post Petition Interest, Not Under Contract Rate, But Under Federal Judgment Rate |
On January 29, 2019, PG&E Corporation (“PG&E”) and its primary operating subsidiary, Pacific Gas and Electric Company (“Debtors”), were forced to file for bankruptcy protection as a result of disastrous wildfires that occurred in Northern California in 2017 and 2018 which gave rise to billions of dollars in liabilities against the power giant.
The chapter 11 Debtor-utility’s propose restructuring plan filed on September 9, 2019 listed unsecured funded debt claims and general unsecured claims as unimpaired, providing that these were allowed, unimpaired claims that would be paid in full, in cash, including post-petition interest at the federal judgment rate provided in 28 U.S.C. § 1961(a), the federal judgment rate from the petition date to the effective date of the plan, which as of the filing of the petition was at 2.59%.
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Running with the Land: Texas Bankruptcy Court’s Alta Mesa Decision Undercuts Sabine, Holding That Gathering Agreements Cannot Be Rejected |
In a significant recent decision in the Alta Mesa chapter 11 case, Bankruptcy Judge Marvin Isgur of the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) held that the debtors’ midstream oil and gas gathering agreements constituted real property covenants “running with the land” under Oklahoma law and, therefore, could not be rejected as executory contracts under § 365 of the Bankruptcy Code. The Bankruptcy Court distinguished the 2016 bankruptcy case of In re Sabine Oil & Gas Corp., in which the United States Bankruptcy Court for the Southern District of
New York, interpreting Texas law, held that the midstream gathering agreements at issue in that case were not covenants running with the land and, thus, could be rejected.
Factual Background
The debtor plaintiffs were Texas limited partnerships doing business in Oklahoma. Alta Mesa contracted with its defendant affiliate, Kingfisher Midstream, LLC (“Kingfisher”), to transport Alta Mesa’s oil and gas over gathering systems to be constructed by Kingfisher. Pursuant to gathering agreements governed by Oklahoma law, Kingfisher built a gas gathering system linking Alta Mesa’s wells to central collection points. In exchange, Alta Mesa promised to deliver substantially all of its hydrocarbons to Kingfisher for fixed gathering fees. Because the fixed fees proved to be expensive, Alta Mesa filed an adversary proceeding seeking, among other things, a declaratory judgment that the gathering agreements were not real property covenants, but instead executory contracts subject to rejection under § 365 of the Bankruptcy Code.
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Rival Lender Groups Fight over the DIP Financing in the J.C. Penney Chapter 11 |
On March 17, 2020, in response to the COVID-19 pandemic to protect its customers and employees, J.C. Penney opted to close all of its stores and decrease supply chain operations. Then, in mid-May, J.C. Penney and its affiliates (the debtors) filed for chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas, with a debtor-in-possession (DIP) loan and restructuring-support agreement (RSA) already in place with its first-lien lenders. In a court filing, the chief financial officer stated that J.C. Penney’s reorganization is “predicated on speed — it is not an option to languish in chapter 11” and that
“nearly 85,000 associates are depending on” the company successfully reorganizing. |
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Registration is now open to join ABI and 15 other insolvency organizations on September 16 as we kick off one of the most encompassing commercial global insolvency events ever! Insolvency 2020 will bring together thought leaders from the worlds of restructuring, insolvency and distressed debt for six weeks of insightful programming and unique networking events. |
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