In re Rede Energia S.A.
515 B.R. 69
Bankr. S.D.N.Y.2014Background
- Rede Energía S.A. (Rede) filed Brazilian judicial reorganization; Foreign Representative seeks recognition as foreign main proceeding and Plan Enforcement Relief under Chapter 15; plan contemplates Energisa’s acquisition and financing of Rede Concessionaires; MP 577/2012 regime restricted bankruptcy filings for concessionaires and emphasized regulatory capitalization; FI-FGTS holds a major secured claim via put rights and is an active participant in voting; plan provides substantive consolidation of five Rede Debtors for plan purposes; unsecured Class III claims (Noteholders) could be treated differently from Concessionaire Claims under ANEEL rules; Brazilian Court approved the plan via cram-down after voting disputes and subsequent adjustments; plan requires enforcement in U.S. to enable distribution to Noteholders and other creditors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Plan Enforcement Relief is proper under 1521(a) | Santos: relief fits 1521(a) as appropriate under 1521(a) | Ad Hoc Group argues relief is improper under 1521/1522 balance | Yes; relief appropriate under 1521(a) |
| Whether Plan Enforcement Relief is proper under 1507 | Santos: relief satisfies 1507(b) factors including just treatment and no US prejudice | Ad Hoc Group contests 1507 balance | Yes; relief proper under 1507(b) |
| Whether relief passes public-policy scrutiny under 1506 | Relief consistent with civilized jurisprudence and comity | Ad Hoc Group argues manifest public-policy violation | No; not manifestly contrary to US public policy under 1506 |
| Whether Brazilian plan distributions respect US priority and crams-down rules | Plan’s distributions justified by ANEEL constraints and Brazilian cram-down protections | Noteholders allege improper priority and discrimination | Distributions not manifestly contrary to US law; cram-down valid under Brazilian law |
| Whether substantive consolidation was appropriate for plan purposes | Brazilian court found consolidation appropriate for plan purposes | Ad Hoc Group challenges under Augie/Restivo and US law | Not manifestly contrary to US public policy; consolidation approved for plan purposes |
Key Cases Cited
- Morning Mist Holdings Ltd. v. Krys (In re Fairfield Sentry Ltd.), 714 F.3d 127 (2d Cir. 2013) (comity and relief standards under Chapter 15; recognition framework)
- In re Cozumel Caribe S.A. de C.V., 482 B.R. 96 (Bankr.S.D.N.Y. 2012) (cross-border insolvency, comity and relief)
- In re Vitro S.A.B. de C.V., 701 F.3d 1031 (5th Cir. 2012) (whether relief under 1507/1521 can be sought as additional assistance)
- Toft, 453 B.R. 186 (Bankr.S.D.N.Y. 2011) (framework for 1507/1521 balancing and comity considerations)
- Bd. of Dirs. of Telecom Arg. v. Telecom Arg., 528 F.3d 162 (2d Cir. 2008) (public policy and due process in cross-border insolvency)
- In re Treco, 240 F.3d 148 (2d Cir. 2001) (public policy and cross-border relief limitations)
- In re Charter Commc’ns Corp., 419 B.R. 221 (Bankr.S.D.N.Y. 2009) (unsecured creditor treatment and discretion under cross-border contexts)
- Garcia Avila, 296 B.R. 95 (Bankr.S.D.N.Y. 2003) (public policy and cross-border recognition)