1992-11-02_GENERAL DOCUMENTS - C1981017 (2)

Home Browse Search

October 29, 1992 Page 4 Liquidating Plan Regardless of whether sales occur piecemeal or in a package, there soon will be sizable amounts of cash proceeds accumulating in debtor in possession accounts. These proceeds will be cash collateral and cannot be expended by Resources without consent of the secured creditor or Court permission. I would like some cash collateral authorization for such matters as the sealing of portals. Sanwa may want, and be entitled to, some interim distributions of proceeds of its collateral as it is received. On the other hand, unsecured creditors may want to condition any such distributions on an overall agreement that shares proceeds with other creditors. My ultimate objective in the case is to work out a consensual agreement with the various creditor constituencies which would form the basis for a liquidating Chapter 11 plan. In June, at a meeting in my office, Sanwa discussed a possible sharing arrangement in which Sanwa would share 16% of every dollar distributed in Resources' bankruptcy with the general unsecured creditors, provided that those creditors did not also attempt to assert claims against Resources' corporate affiliates, who have guaranteed Resources' obligations to Sanwa. This proposal had several important contingencies, including consummation of the pending sale negotiations with Geneva; approval by senior management of Sanwa; and agreement by Resources' unsecured creditors to waive any claims that they might have against Mid-Continent Minerals, Mid-Continent Coal & Coke, and other corporate affiliates, as well as against Sanwa. Unsecured creditors of Resources apparently have been looking for claims which could be asserted against Sanwa or Resources ' affiliates, including corporate piercing, lender liability, and equitable subordination. The Committee and the Division need to decide whether they are willing to settle out potential litigation claims against other parties in exchange for a share of Resources' bankruptcy estate. If Sanwa agrees to have some of the Resources' estate go to other creditors, Sanwa will have to be comfortable that the remainder of its claim ultimately will be paid by Resources ' affiliates, who also are obligated to Sanwa directly or through guarantees. Permitting creditors to receive a portion of Resources' assets and pursue claims against Resources' affiliates gives creditors two bites at the apple. My own view is that claims against Sanwa or Resources' affiliates are a waste of time, but that the unsecured creditors are entitled to a portion of Resources ' estate as the price of administering Resources' assets in bankruptcy. I understand that counsel for the Creditors' Committee is evaluating whether