460 B.R. 818
Bankr. S.D.N.Y.2011Background
- Borders Group, Inc. and its debtor subsidiaries filed Chapter 11 petitions on February 16, 2011 in SDNY.
- Debtors sought a 120-day extension of exclusivity under 11 U.S.C. §1121(d) to file a plan and to solicit acceptances.
- The Exclusive Filing Period would extend to October 14, 2011 and the Solicitation Period to December 13, 2011.
- The Official Committee of Unsecured Creditors objected, arguing lack of demonstrated cause and premature timing.
- Court balanced Adelphia factors and evidence of ongoing restructuring, ultimately granting the extension despite objections.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether to extend exclusivity under §1121(d). | Debtors show cause for extension due to case size and progress. | Committee argues no sufficient cause and potential harm to creditors. | Yes; extension granted. |
| Are Adelphia factors satisfied to justify extension? | Evidence supports size, progress, and viable path to exit. | Factors not all clearly favorable; concerns over negotiations. | Factors favor extension. |
| Does DIP loan status influence extension decision? | Termination of exclusivity could trigger DIP default. | Argues no risk in extending exclusivity. | Court weighs DIP implications in favor of extension. |
| Should exclusivity be shared with the Committee? | Shared exclusivity not appropriate given case-specific context. | Committee advocated shared exclusivity. | Shared exclusivity denied. |
| Impact on potential sale vs. reorganization plan? | Sale path via 363 sale may proceed with exclusivity. | Unclear best exit path. | Extension appropriate to facilitate orderly exit strategy. |
Key Cases Cited
- Adelphia Communications Corp., 352 B.R. 578 (S.D.N.Y. 2006) (factors for determining exclusivity extension; discretionary, fact-specific)
- McLean Industries, Inc., 87 B.R. 830 (S.D.N.Y. 1987) (size and complexity weigh in favor of extension)
- Texaco, Inc., 76 B.R. 322 (S.D.N.Y. 1987) (complex debt structure supports extending exclusivity)
- Perkins, 71 B.R. 294 (W.D. Tenn. 1987) (burden to show cause rests on moving party; context matters)
- AMKO Plastics, 197 B.R. 74 (S.D.Ohio 1996) (turnaround potential supports extension despite losses)
- In re APEX Pharms., Inc., 203 B.R. 432 (N.D. Ind. 1996) (early-stage turnarounds may show reasonable possibility of reorganization)
- In re United Press Intern., Inc., 60 B.R. 265 (Bankr. D. Col. 1986) (shared approach discussed; context-dependent)
- Dow Corning Corp., 208 B.R. 661 (Bankr. E.D. Mich. 1997) (practical considerations can override factor tally)