In Re Boston Generating, LLC
440 B.R. 302
Bankr. S.D.N.Y.2010Background
- Boston Generating, LLC and affiliates filed chapter 11 petitions; cases are jointly administered in SDNY; Debtors operate New England power plants and carry about $2B in secured and unsecured debt.
- Sale motion seeks approval of a 363 sale to Constellation Holdings, free and clear of liens, with assignment of certain contracts; asset purchase price is $1.1B cash subject to working capital adjustments.
- Intercreditor Agreement governs seniority of First Lien and Second Lien debt; Second Lien Lenders object to standing and to the sale process under 363.
- Special Committee appointed with expanded authority to evaluate sale options; the Court previously approved bid procedures and stalking horse protections.
- Debtors faced liquidity constraints; JPMorgan led an extensive sale process with broad marketing; one qualified bid (Constellation) remained after market process; FERC and NGA issues influenced the ancillary proceedings.
- Final sale order grants the Debtors’ sale, confirms Constellation’s good faith purchaser status, and reserves rights on the Second Liens’ rights in distribution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Second Lien Lenders have standing to object to the 363 sale | Second Lien Agent argues lack of standing; Intercreditor fails to preclude objections | Debtors/First Lien contend Intercreditor permits unsecured-creditor objections; no express waiver | Second Lien Lenders have standing to object under Intercreditor Agreement |
| Whether a sale of substantially all assets outside a plan is permissible under §363 | Matlin argues no good business reason; plan alternative could be better | Debtors show articulated business justification and good business reason; Lionel/GM factors support sale | Yes, sale approved under §363 with good faith and business-judgment standards |
| Whether the sale can be free and clear under §363(f) despite liens | Second Lien Lenders contend §363(f)(3)/(f)(5) not satisfied | Sale complies with §363(f)(3) by value of liens; §363(f)(5) can compel satisfaction; alternative risk present | Sale approved free and clear under §363(f)(3) and §363(f)(5) |
| Whether the sale constitutes a “sub rosa” plan | Sale mirrors a plan to favor First Lien lenders | sale is standalone asset disposition; not a hidden plan | Not a sub rosa plan; sale proper |
| Whether the process and price pass the 3-part GM/related standard (notice, price, good faith) | Objections to price and process raise questions on diligence | Process was robust, price fair, and Constellation a good-faith purchaser; fiduciary duties satisfied | Yes: sale satisfies notice, price, and good-faith requirements |
Key Cases Cited
- In re Lionel Corp., 722 F.2d 1063 (2d Cir. 1983) (articulated business justification and Lionel factors for 363 sale outside plan)
- In re General Motors Corp., 407 B.R. 463 (S.D.N.Y. 2009) (GM factors; liquidity, timing, and sale vs. plan considerations)
- In re Chrysler LLC, 405 B.R. 84 (Bankr.S.D.N.Y. 2009) (business-judgment framework; no obligation to pursue nonviable plans)
- In re Westpoint Stevens, Inc., 333 B.R. 30 (Bankr. S.D.N.Y. 2005) (priority rights and intercreditor considerations)
- In re Beker Indus. Corp., 63 B.R. 474 (Bankr.S.D.N.Y. 1986) (value of liens for §363(f)(3) analysis; focus on collateral value)
- Clear Channel Outdoor, Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25 (9th Cir. BAP 2008) (interpretation of 363(f)(3) value standard; relevance of collateral value)
- In re Granite Broad. Corp., 369 B.R. 120 (Bankr.S.D.N.Y. 2007) (value and market-driven evidence as valuation indicators)
- 203 North LaSalle St. Pst, L.P., 246 B.R. 325 (Bankr.N.D. Ill. 2000) (voting rights and plan-related considerations in intercreditor contexts)