441 B.R. 470
Bankr. D.S.C.2010Background
- Debtor Gyro-Trac, Inc. filed Chapter 11 on March 17, 2010 together with West Coast and GT Inc.; all three are controlled by Daniel Gaudreault.
- The patent on Gyro-Trac technology is currently held by Denis CIMAF and licensed to GT Inc., then transferred to International in 2009.
- Debtor’s assets include inventory, manufacturing equipment purchased in the Usitech liquidations, and ongoing operations to produce GT-13 and GT-25 machines.
- BB&T (through a floor plan) and BMO have secured claims; BB&T holds first priority on inventory and Debtor’s equipment is pledged to multiple lenders; BMO’s lien is superimposed on Debtor and West Coast/GT Inc. assets.
- Debtor proposed a plan merging the Gyro-Trac entities into a single entity, continuing manufacturing in-house, and paying creditors over a multi-year horizon; BMO objected to confirmation and sought relief from stay in related motions.
- The Court conducted a multi-day confirmation hearing and, after evaluating feasibility, good faith, and treatment of creditors, confirmed the Plan and granted related consolidation, with moot issues regarding cash collateral.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Feasibility of the plan under 1129(a)(11) | Plaintiff (Debtor) contends projections show positive cash flow under various scenarios. | BMO challenges assumptions, margin, and working capital projections as unrealistic. | Plan deemed feasible; credible projections support a reasonable probability of success. |
| Good faith of the plan under 1129(a)(3) | Debtor argues totality of circumstances supports good faith restructuring. | BMO alleges bad faith due to asset transfers and management structure. | Plan proposed in good faith based on the totality of circumstances. |
| Cram-down feasibility under 1129(b) | Plan treats secured creditor fairly with continued liens and debt service. | BMO argues plan discriminates and undermines absolute priority. | Plan is fair and equitable and does not discriminate unfairly; cram-down permissible. |
| Retention/appointment of insiders under 1129(a)(7) and 1123(a)(7) | Gaudreault to remain president; Quirion and Queen to be hired for continuity. | Objection to insiders’ roles. | Insider retention and new hires are consistent with creditors’ interests and public policy. |
| Substantive consolidation of Debtor, West Coast, and GT Inc. under 105/Derivium test | Consolidation simplifies administration and reflects intermingled affairs. | Creditors rely on separate entities; consolidation could prejudice. | Substantive consolidation warranted; cases to be consolidated to implement the Plan. |
Key Cases Cited
- In re Radco Props., Inc., 402 B.R. 666 (Bankr.E.D.N.C. 2009) (feasibility factors and totality of circumstances in plan confirmation)
- In re Piece Goods Shops Co./Piece Goods Shops Corp., 188 B.R. 778 (Bankr.M.D.N.C. 1995) (totality of circumstances standard for confirming plans)
- In re Walker, 165 B.R. 994 (E.D.Va. 1994) (criteria for feasibility and reasonableness of plan)
- In re Drexel Burnham Lambert Group, Inc., 138 B.R. 723 (Bankr.S.D.N.Y. 1992) (plan feasibility considerations and need for realistic projections)