2021-01-14_GENERAL DOCUMENTS - C1980004

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Case 120-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/21 110353 Desc Main Case 120-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/21 110353 Desc Main Document Page 33 of 44 Document Page 34 of 44 forbidden by law. Therefore, the good faith requirement of section 1129(a)(3) ofthe Bankruptcy Code has been satisfied. D. Pavments for Services and Expenses (Section 1129(a)(4)) Section 1129(a)(4) of the Bankruptcy Code requires that Any payment made or to be made by the proponent, by the debtor, or by a person issuing securities or acquiring property under the plan, for services or for costs and expenses in or in connection with the case, or in connection with the plan and incident to the case, has been approved by, or is subject to the approval of, the court as reasonable. 11 U.S.C. § 1129(a)(4). In essence, this subsection requires that any and all fees promised or received in connection with or in contemplation of a chapter 11 case must be disclosed and approved, or subject to approval, by the court. In re Eagle-Picher Ind s., Inc., 203 B.R. 256, 274 (Bankr. S.D. Ohio 1996). Article III ofthe Plan establishes the mechanism for the payment of various Professional Fee Claims, but the fees are subj ectto Bank uptcy Court approval based on the standards described in the Bankruptcy Code. Accordingly, the provisions ofthe Plan comply with section 1129(a)(4) of the Bankruptcy Code. E. Identification of Directors, Officers and Insiders (Section 1129(a)(5)) Section 1129(a)(5)(A) requires the proponent of any plan to disclose the "identity and affiliations of any individual proposed to serve, after confirmation of the plan, as a director, officer, or voting trustee ofthe debtor, an affiliate ofthe debtor participating in a joint plan with the debtor, or a successor to the debtor under the plan," and requires a finding that "the appointment to, or continuance in, such office of such individual, is consistent with the interests of creditors and equity security holders and with public policy." 11 U.S.C. § 1129(a)(5)(A)O-(n). Additionally, section 1129(a)(5)(B) requires the proponent of a plan to disclose the "identity of any insider that W will be employed or retained by the reorganized debtor, and the nature of any compensation for such insider." 11 U.S.C. § 1129(a)(5)(B). In these cases, however, the Plan contemplates the liquidation of the Debtors and no directors or officers will be appointed. Because the Plan contemplates the winding down of the Debtors' affairs, § 1129(a)(5) of the Bankruptcy Code, which requires the Proponents to disclose certain information about its post -confirmation officers and directors, is not relevant to confirmation ofthe Plan. See In re Sentinel Management Group, Inc., 398 B.R. 281 (Banta. N.D. Ill. 2008) (finding that Section 1129(a)(5) does not apply to a post -confirmation liquidating trust). The Proponents have, however, filed a notice that GlassRatner Advisory & Capital Group, LLC d/b/a B. Riley Advisory Services will serve as the Liquidating Trustee. See Liquidating Trustee Notice. F. Rate Chanties (Section 1129(a)(6)) Section 1129(a)(6) ofthe Bankruptcy Code requires that any regotatory commission having jurisdiction over the rates charged by the reorganized debtor in the operation of its business approve any rate change under the plan. The Proponents submit that section 1129(a)(6) of the Bankruptcy Code is inapplicable to the Plan because the Plan does notprovide for any rate changes subject to the jurisdiction of any governmental regulatory commission. G. The "Best Interests" Test (Section 1129(a)(7)) Section 1129(a)(7) of the Bankruptcy Code requires that a plan be in the best interests of creditors and equity holders. This "best interests" test focuses on individual dissenting creditors rather than classes of claims. See Bank ofAm. Nat? Trust & Say. Assn v. 203 N LaSalle St. P'ship, 526 U.S. 434, 441 n.13 (1999). The best interests test requires that each holder of a claim or equity interest either accept the plan or receive or retain under the plan property having a present value, as of the effective date of the plan, which is not less than the amount such holder would receive or 34 Case 120-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/21 110353 Desc Main Case 120-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/21 110353 Desc Main Document Page 35 of 44 Document Page 36 of 44 retain if the debtor was liquidated under chapter 7 ofthe Bankruptcy Code. 11 U.S.C. § 1129(a)(7). If a class of claims or interests unanimously approves the plan, the best interests test is deemed satisfied for all members of that class. In re Drexel Burnham Lambert Grp., Inc., 138 B.R. 723, 761 (Banks. S.D.N.Y. 1992). Under the Plan, five classes are impaired (Class 1 Priority Claims, Class 3 DIP Claims, Class 4 Prepetition Lender Claims, Class 5 General Unsecured Claims and Class 6 Equity Interests). The test, therefore, requires that each holder of a Claim or Equity Interest in those Classes either accept the Plan or receive or retain under the Plan property having a present value, as ofthe Effective Date ofthe Plan, of no less than the amount that such holder would receive or retain if the Debtors were liquidated under chapter 7. The Proponents have satisfied section 1129(a)(7) with respect to all Classes. Withrespect to the holders of Claims (or Equity Interests, as applicable) in Classes 1, 5, and 6, such holders will receive a recovery of no less than the amount that they would receive if these cases were converted under chapter 7 of the Bankruptcy Code. s First, in a chapter 7 liquidation, the Estates would Lose the additional $100,000 payable under the Released Party Order. That amount is only payable upon confirmation of the Plan, including the exculpation and release provisions discussed above. Second, conversion to a chapter 7 would generate additional Administrative Claims and costs related to the chapter 7 liquidation. The chapter 7 trustee's professionals, including its legal counsel and accountants, would add administrative expenses that would be entitled to be paid ahead of Allowed Claims. The Estates would also be obligated to pay all unpaid expenses incurred by the Debtors and the Committee during these Chapter 11 Cases (such as compensation for s Section 1129(s)(7) is inapplicable m Classes 3 and 4 because 100% of Hold— in those Classes voted m fsvor of the Plan. 35 Professionals) before payments could be made to holders of unsecured claims. In addition, the Cash to be distributed to holders of Claims would be reduced by the chapter 7 trustee's statutory fee, which is cat -fated on a sliding scale where the maximum compensation is determined based on the total amount of monies disbursed or turned over by the chapter 7 trustee. The Debtors already expect to have well over $1 million on hand as of the Effective Date — and may have several million more after the conclusion of all Litigation —resulting in a fee to the chapter 7 trustee that could be several hundred thousand dollars. Third, it is Likely that distributions from a chapter 7 estate would be significantly delayed. As a result, the present value of such distributions is likely to be materially lower than if made under the Plan. Therefore, under a chapter 7 Liquidation, holders of Allowed Claims would receive significantly less than they would receive under the Plan. IL Acceptance by Impaired Classes (Section 1129(a)(8)) Section 1129(a)(8) of the Bankruptcy Code requires that each class of claims and equity interests either has accepted a chapter 11 plan or is not impaired under a chapter 11 plan. 11 U.S.C. § 1129(a)(8). Class 6 — Equity Interests — were deemed to reject the Plan under section 1126(g) because they are not entitled to receive or retain any property under the Plan. Even though Class 6 is deemed to reject the Plan, the Plan is confirmable because it satisfies section 1129(b), as further discussed below. I. Treatment of Priority Claims (Section 1129(a)(9)) Section 1129(a)(9) ofthe Bankruptcy Code requires full payment of allowed administrative expense claims and payment over time of allowed priority claims, consistent with Section 507 of the Bankruptcy Code. As set forth in Article III, Section 3.02(a) of the Plan, the Debtors or the Liquidating Trustee, as applicable, will pay all Allowed Administrative Claims in cash in full on the latter of (i) the Effective Date if due on or before that date and unpaid on the Effective Date, 36