Of KERPs and Bonuses: Let the Revolution Begin!
by Thomas J. Salerno
Squire, Sanders & Dempsey L.L.P.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) arrived in October 2005 with predictions of major changes to commercial chapter 11 practice notwithstanding the unmistakable aim of BAPCPA to further disenfranchise the politically weak financially distressed consumer debtor at the behest of the monolithic credit card companies. The uncertainty was, in itself, enough to propel some major chapter 11 filings before the mid-October 2005 effective date (for most provisions)—a notable example being Delta Airlines. These materials focus on BAPCPA’s impact on Key Employee Retention Plans (KERPs) and bonuses for management of the financially distressed business enterprise. It is a fair characterization of the BAPCPA changes in this area that they amount to thinly veiled “class warfare” against the perceived “robber barons” of the chapter 11 process—executives who purportedly profit from the distress of their businesses at the expense of creditors.
Read the full article. (Materials from the 2006 Southwest Bankruptcy Workshop)
Navigating the Minefields of Representing Chapter 11 Committees – Getting Employed, Managing Inter-committee Conflicts and Complying with BAPCPA
by Jeffrey N. Pomerantz, Jonathan J. Kim
Pachulski Stang Ziehl Young Jones & Weintraub LLP
While there is no clear right to carve-outs for committee professionals’ fees, such carve-outs are justified by important policy goals and should, in many jurisdictions, be viewed as the practical rule and not the exception. In some cases, in the context of a cash collateral or post-petition financing stipulation with the debtor, debtor’s secured lenders may resist providing for a “carve-out” for the payment of the post-petition fees and expenses of the official committee(s) and its counsel and other professionals. Such carve-outs have been defined as “agreement[s] by a party secured by all or some of the assets of the estate to allow some portion of its lien proceeds to be paid to others, i.e., to carve-out its lien position.” Because a carve-out is a charge against its collateral, secured lenders argue that they should have the sole right and discretion to determine who, if anyone, will benefit from the subject carve-out.
Read the full article. (Materials from the 2006 Southwest Bankruptcy Workshop)
Agenda for the 2006 Winter Leadership Conference
The Business Reorganizationand Young and New Members committees will present on Dec. 1 at 3:45 pm, "You Can Run, But Can You Hide? Are Third-Party Releases Permissible in Reorganization Plans?" The session will be a practical discussion including the judicial, business and legal perspective of the status of the law concerning third-party releases in reorganization plans. The panel will discuss the business goals driving the necessity of third-party releases as part of reorganization plans and provide a synopsis of the status of the cases in this area, including discussion of the split among the circuits and recent case developments. Finally, the panel will provide practical advice as to how practitioners can effectively document, advocate for and enforce third-party releases contained in reorganization plans. Speakers will be Brian L. Shaw, Moderator (Shaw Gussis Fishman Glantz Wolfson & Towbin LLC; Chicago), Ronald S. Barliant (Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd.; Chicago), Hon. Judith K. Fitzgerald (U.S. Bankruptcy Court, W.D. Pa.; Pittsburgh) and William C. Kosturos (Alvarez & Marsal, LLC; San Francisco).