The American Bankruptcy Institute will kick-off its 33rd Annual Spring Meeting in Washington, D.C. on April 16. Lou Gramm, the former lead singer for Foreigner, and a humble panel of bankruptcy heavyweights are fighting for top billing. Not really. After all, Gramm gets a 3 hour “Gala Dinner.” However, the panel will address a topic that will get top billing on this blog: confirmation issues. As advertised, the panel, titled “How Secured Are Secured Creditors? The Changing Landscape of Chapter 11 Plan Confirmation,” will address confirmation standards under § 1129(a) and (b). In particular, the panel will emphasize “recent developments affecting senior and junior secured creditors including the ABI Commission Report.” Lacking a more clever publication schedule, Plan Proponent will spend the next 8 to 9 weeks leading-up to the D.C. Meeting to dig into the confirmation-related recommendations in the ABI Commission Report.
In our Internet Age, the ABI Commission Report is almost old news. On December 8, 2014, the ABI Commission released its 402 page Final Report and Recommendations, representing the culmination of the Commission’s three year “Study of the Reform of Chapter 11.” The ABI created the Commission in 2012 as a response to the general consensus that the ’78 Bankruptcy Code needs an overhaul. Specifically, the Commission’s Co-Chairs explained that:
“The 1978 Code has been largely overwhelmed by changes in the economy, in lending practice and the makeup of the lending community, and in the meteoric rise of the distress debt markets, among other changes.”
The Commission observed that U.S. reorganization laws generally have about a 30 to 40 year shelf-life before an overhaul is necessary. Thus, the Commissioners (22 of the most prominent business restructuring professionals in the U.S.) spent three years studying the “resolution of financially distressed businesses” under Chapter 11.
“study and propose reforms to Chapter 11 and related statutory provisions that will better balance the goals of effectuating the effective reorganization of business debtors.”
“balance the interests of debtors, secured lenders and other stakeholders, creating a restructuring regime that encourages the preservation of jobs and going concern value.”
To be sure, the Commission gave the study the full D.C. legislative treatment, replete with 150 experts spread over 13 advisory committees; an international working group consisting of other experts from at least 12 countries; prodigious amounts of back-office research and data compilation; and over 15 public field hearings in 11 different cities. In fact, nearly 90 individuals testified. Fortunately for the restructuring community, the Commission conducted many of the hearings on site at ABI, National Conference of Bankruptcy Judges (NCBJ), Turnaround Management Association (TMA), and Commercial Finance Association (CFA) conferences.
The end result covers the entire life-cycle of Chapter 11, with three major phases: Commencing the Case, Administering the Case, and Exiting the Case. Plan Proponent will take-up the Exiting the Case piece. In turn, the Commission split the Exiting piece into 7 parts:
- Part A: Authority of the Debtor in the Plan Process
- Part B: Approval of Section 363 Sales (“plans” in their own right?)
- Part C: Valuation Issues
- Part D: Disclosure; Postconfirmation Entities; and Claims Trading
- Part E: Plan Content
- Part F: Plan Voting and Confirmation Issues
- Part G: Chapter 11 Exit Orders
As a bonus, we will also cover the plan-related recommendations in the Report’s separate section on “Small and Medium-Sized Enterprise (SME) Cases”—a new type of business bankruptcy case proposed by the Commission to address what some call Chapter 11’s “one size fits all” approach.
A hallmark of the Report is that it not only provides recommendations for improving areas of Chapter 11, but it also provides excellent background on those areas. Over the next 8 to 9 weeks, Plan Proponent will endeavor to cover both, part by part. Stay tuned.
In the meantime, here are some pertinent links:
ABI Commission (all things Commission Report, including hearing videos)
ABF Journal Lead-Up Article (by Commission Co-Chairs Robert Keach & Albert Togut)