2021-01-22_GENERAL DOCUMENTS - C2010088

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Case 1 20-bk-12043 Doc 573 Filed O1/13/21 Entered 011131211103 53 Desc Main Document Page 33 of 44 Case 1 20-bk-12043 Doc 573 Filed 01/13/21 Entered 01/1312111,03.53 Desc Main Document Page 34 of 44 forbidden by law Therefore, the good faith requirement of section I I29(a)(3) of the Bankruptcy Code has been satisfied D. Payments for Services and Expenses (Section 1129(a)(4)) Section 1129(a)(4) ofthe 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 § I129(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 Indus, Inc , 203 B R 256, 274 (Banta S D Ohio 1996) Article III of the Plan establishes the mechanism for the payment of varmus Professional Fee Claims, but the fees are subject to Bankruptcy Court approval based on the standards described in the Bankmptcy Code Accordingly, the provisions of the Plan comply with section 1129(a)(4) ofthe Bankruptcy Code E. Identification of Directors, Officers and Insiders (Section 1129(a)(51) Section 1129(a)(5)(A) requires the proponent of any plan to disclose the "identity and affiliations of any mdn idual proposed to serve, after confirmation ofthe plan, as a director, officer, or voting trustee ofthe debtor, an affiliate ofthe debtor participating in ajomt 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." I U S C § 1129(a)(5)(A)(i)-(n) Additionally, section 1129(a)(5)(B) requires the proponent of a plan to disclose the "identity of any insider that RS7 Case 1 20-bk-12043 Doc 573 Filed 01/13/21 Entered 01/13/2111 03 53 Desc Main Document Page 35 of 44 retain ifthe debtor was liquidated under chapter 7 ofthe Bankruptcy Code I1 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 (Bank¢ 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 Claret 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 With respect 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 ofthe Bankruptcy Code 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 I Cases (such as compensation for 'S-- 1129(a)(7) a mapphnhk to Clasas 3 end 4 because 100'. of Holders w those Classes eoted in favor of the Plan 35 will be employed or remand by the reorganized debtor, and the nature of any compensation for such insider" 11 U S C § I I29(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 of the Plan See In re Sentinel Management Group, Inc , 398 B R 281 (Bankr N D Bl 2008) (finding that Section 1129(a)(5) does not apply to a post -confirmation liquidating trust) The Proponents have, however, filed a nonce that GlzssRatner Advisory & Capital Group, LLC d/b/a B Riley Advisory Services will serve as the Liquidating Trustee See Liquidating Trustee Notice F. Rate Chanees (Section 1129(a)(6)) Section I I29(a)(6) of the Bankruptcy Code requires that any regulatory 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 Bankmptcy Code is inapplicable to the Plan because the Plan does not provide for any rate changes subject to the junsdiction of any governmental regulatory commission G. The "Best Interests" Test (Section 1129(a)(7)) Section 1129(a)(7) ofthe Bankruptcy Code requires that a plan be in the best interests of creditors and equity bolders This "best interests" test focuses on individual dissenting creditors rather than classes of -claims See Bank ofAm Nat'l Trust & Sav Assn v 203 N LaSalle St P',hip, 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 ofthe effective date ofthe plan, which is not less than the amount such holder would receive or 34 Case 1 20-bk-12043 Doc 573 Filed O1/13/21 Entered 01/13/21 11 03 53 Desc Main Document Page 36 of 44 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 calculated on a sliding scale where the maximum compensation is determmed 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 tmstee that could be several hundred thousand dollars Third, it is likely that distnbuhons from a chapter 7 estate would be significantly delayed As a result, the present value of such dismbutiom 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 H. Acceptance by Impaired Classes fSection 1129(a)(8)) Section I I29(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 confineable because it satisfies section 1129(b), i s further discussed below 1. Treatment of Priority Claims (Section 1129(a)(9)) Section I I29(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 111, Section 3 02(a) of the Plan, the Debtors or the Liquidating Tmstee, as applicable, will pay all Allowed Administrative Claims to 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