486 B.R. 286
Bankr. D. Del.2013Background
- Debtors seek confirmation of Modified Second Amended Joint Plan of Reorganization for a racino in Indiana.
- Oliver Parties (senior management and equity/debt holders) and the US Trustee oppose confirmation and object to releases.
- RSA dated April 25, 2012 created a parallel path: sale to Centaur if market bids succeed or recapitalization otherwise.
- Court previously approved disclosure statement and sale to Centaur proceeding; sale hearing held October 2012.
- Court denies Oliver Parties’ Motion to Designate votes under 11 U.S.C. §§1125/1126 and overrules other objections to confirm the Plan.
- Plan contemplates $500 million-plus sale proceeds and allocations among creditor classes; regulatory approvals required for Centaur closing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether designation of votes is proper. | Oliver Parties: RSA votes improperly solicited pre-disclosure; designation appropriate. | Debtors/RS Parties: designation not warranted; RSA not solicitation; votes should stand. | Motion to Designate denied. |
| Feasibility of the Plan. | Oliver Parties: approvals uncertain doom feasibility. | Centaur licensure/approvals likely; plan offers reasonable assurance of success. | Plan feasibility approved; objections overruled. |
| Caps on administrative and priority tax claims. | Caps unlawfully limit statutory rights and payments. | Caps are budgetary prerequisites, not limits on payment; consistent with 1129(a)(9). | Caps do not impair priority rights; objections overruled. |
| Allowance of professional fees to Restructuring Support Parties (503(b)). | Fees improper as undersecured/non-consensual; disparate treatment risk. | Fees allowed under 503(b) for post-petition contributions and as authorized by Final DIP Order. | Fees/expenses approved under §503(b); not a violation of 1123(a)(4). |
| Releases and exculpations under the Plan. | Third-party releases/star considerations improper non-consensual releases. | Releases consensual; bound unimpaired creditors and opt-out for impaired creditors; exculpations appropriate. | Debtors’ Releases, Third-Party Releases, and Exculpations approved. |
Key Cases Cited
- In re Century Glove, 860 F.2d 94, 860 F.2d 94 (3d Cir.1988) (solicitation must be read narrowly; protects negotiations between creditors)
- In re Heritage Organization, L.L.C., 376 B.R. 783, 376 B.R. 783 (Bankr.N.D.Tex.2007) (narrow solicitation/term sheets; co-proponent treatment supports non-designation)
- In re Zenith Elecs. Corp., 241 B.R. 92, 241 B.R. 92 (Bankr.D.Del.1999) (five-factor test for releases; indemnification relevance)
- In re Spansion, Inc., 426 B.R. 114, 426 B.R. 114 (Bankr.D.Del.2010) (consensual third-party releases allowed if bound in plan and notice adequate)
- In re Washington Mut., Inc., 442 B.R. 314, 442 B.R. 314 (Bankr.D.Del.2011) (exculpation limited to fiduciaries; third-party releases depend on consent)
- In re Kellogg Square Partnership, 160 B.R. 339, 160 B.R. 339 (Bankr.D.Minn.1993) (solicitation tied to court-approved disclosure statement; pre-approval context matters)
- In re Adelphia Communications Corp., 359 B.R. 54, 359 B.R. 54 (Bankr.S.D.N.Y.2006) (designation of votes heavy burden; discretion in case-by-case)
- In re Dune Deck, Owners Corp., 175 B.R. 839, 175 B.R. 839 (Bankr.S.D.N.Y.1995) (courts wary of penalizing creditors for negotiations)