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Carbondale Glen Lot L-2, LLC, along with thirteen affiliates and subsidiaries, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware.  All of the filers are affiliates of the Woodbridge Group of Companies, LLC, whose cases are currently being jointly administered under Lead Case No. 17-12560.  According to the Corporate Organizational Chart attached to the Petition, all of the new debtors are “non-collateral filers.”  Cole Schotz previously provided coverage of Woodbridge’s filing here.  The Garden City Group is the claims and noticing agent.  The cases are assigned to the Honorable Kevin J. Carey.

Contact Norman L. Pernick or Nicholas J. Brannick for more information regarding this matter.  Please note, however, that Cole Schotz P.C. does not represent the debtors in these cases and cannot respond to questions directed toward the debtors.

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Upcoming Committee Formation Meeting:  Thursday, February 15, 2018 10:00 AM

Case Name: 18-10248 (MFW)

Location: The Double Tree Hotel, 700 King Street, Wilmington, DE 19801

Notice of Formation Meeting for Official Committee of Unsecured Creditors can be found here. See the petition for relief here.

Contact Norman L. Pernick and Nicholas J. Brannick for more information.

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Ascent Resources Marcellus Holdings, LLC, along with two of its affiliates and subsidiaries, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-10265).  The Debtors, based in Oklahoma City, OK, operate as an oil and natural gas E&P in the Marcellus Shale basin in the eastern United States.  As explained in a press release issued by the Debtors, the Debtors’ parent company (Ascent Resources, LLC) and a number of affiliates focusing on the Utica Shale basin are not part of this restructuring and their operations will be unaffected by the Debtors’ cases.  According to the First Day Declaration, the Debtors enter Chapter 11 with a prepackaged plan of reorganization under which the Debtors’ first and second lien term loans will be converted to equity in the reorganized Debtors and unsecured creditors will be paid in full.  Holders of 78% of the Debtors’ first lien term loans and 79% of the Debtors’ second lien term loans, the only impaired classes under the Plan, have already voted in favor of the Plan.  Prime Clerk LLC is the proposed claims and noticing agent.  The cases have been assigned to the Honorable Laurie Selber Silverstein.

Contact Norman L. Pernick or Nicholas J. Brannick for more information regarding this matter.  Please note, however, that Cole Schotz P.C. does not represent the debtors in these cases and cannot respond to questions directed toward the debtors.

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The Bon-Ton Stores, Inc. (NASDAQ: BONT), a department store retailer headquartered in York, PA, has, along with nine (9) of its affiliates and subsidiaries, filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-10248).  Bon-Ton issued a press release announcing its filing on Sunday and has set up a restructuring website for interested parties.  Bon-Ton’s petition states that as of October 28, 2017, Bon-Ton had $1,586,595,000 in assets and $1,742,558,000 in liabilities.  According to the First Day Declaration, Bon-Ton enters Chapter 11 with its options open and is simultaneously pursuing both a standalone restructuring and a sale of substantially all of its assets under Section 363.  According to the Bid Procedures Motion, Bon-Ton enters Chapter 11 without a stalking horse bidder, but seeks authority from the Court to enter into a stalking horse agreement on or before March 19, 2018.  Bon-Ton also seeks approval of $725,000,000 in DIP financing provided by its pre-petition ABL lenders, with Bank of America, N.A., as administrative agent.  Prime Clerk LLC is the proposed claims and noticing agent.  The cases have been assigned to the Honorable Mary F. Walrath.

Contact Norman L. Pernick or Nicholas J. Brannick for more information regarding this matter.  Please note, however, that Cole Schotz P.C. does not represent the debtors in these cases and cannot respond to questions directed toward the debtors.

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Patriot National, Inc., a Fort Lauderdale, FL-based provider of technology and outsourcing solutions to the insurance industry, has, along with eighteen affiliates and subsidiaries, filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-10189).  Patriot’s petition estimates both its assets and liabilities to be between $100–$500 million.  According to the First Day Declaration, Patriot enters Chapter 11 having negotiated a restructuring support agreement and prepackaged plan of reorganization with its  pre-petition secured lenders.  The Disclosure Statement can be found here.   Prime Clerk is the proposed claims and noticing agent.  The cases have been assigned to the Honorable Kevin Gross.

Contact Norman L. Pernick or Nicholas J. Brannick for more information regarding this matter.  Please note, however, that Cole Schotz P.C. does not represent the debtors in these cases and cannot respond to questions directed toward the debtors.

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Ensequence, Inc., a New York, NY based provider of tools for creating interactive television advertising, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Case No. 18-10182).  Ensequence’s Petition estimates it assets to be between $1–$10 million and its liabilities to be between $10–$50 million.  According to the First Day Declaration, Ensequence has filed for Chapter 11 relief as a result of the unexpected termination of a major contract, after which Ensequence was no longer able to generate sufficient revenue to cover its capital costs.  The Declaration further reports that Ensquence has entered into a forbearance agreement with its secured lender to allow the consensual use of cash collateral and intends to pursue a sale under Section 363 of the Code.  Rust/Omni is the proposed claims and noticing agent.  The case has been assigned to the Honorable Kevin Gross.

Contact Norman L. Pernick or Nicholas J. Brannick for more information regarding this matter.  Please note, however, that Cole Schotz P.C. does not represent the debtors in these cases and cannot respond to questions directed toward the debtors.

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Rand Logistics, Inc., along with six affiliates and subsidiaries, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-10175).  Rand, a leading provider of bulk freight shipping services in the Great Lakes region, previously announced on November 21st that it was being acquired by American Industrial Partners, the sole holder of Rand’s second lien notes, via a prepackaged plan of reorganization.  The First Day Declaration bears this announcement out, explaining that Rand enters Chapter 11 having negotiated with AIP a prepackaged Plan of Reorganization that will pay unsecured creditors in full, while swapping AIP’s notes for equity in the reorganized Rand.  The Disclosure Statement can be found here.  Rand proposes to have a combined hearing on the prepacked Plan and Disclosure Statement on February 27, 2018.  A list of creditors can be found here.  Kurtzman Carson Consultants, LLC, is the proposed claims and noticing agent. The cases have been assigned to the Honorable Brendan Linehan Shannon.

Contact Norman L. Pernick or Nicholas J. Brannick for more information regarding this matter.  Please note, however, that Cole Schotz P.C. does not represent the debtors in these cases and cannot respond to questions directed toward the debtors.

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A new day recently dawned in the post-ASARCO bankruptcy world, as the Bankruptcy Court for the District of New Mexico became the first court to hold that debtors and their attorneys can include “fees on fees” provisions in their retention agreements.  In re Hungry Horse, LLC, 574 B.R. 740 (Bankr. D.N.M. 2017).  In reaching this holding, Judge Thuma expressly disagreed with Judge Walrath’s holding in In re Boomerang Tube, Inc., 548 B.R. 69 (Bankr. D. Del. 2016).  Unlike Judge Walrath, Judge Thuma believes that a “fees on fees” provision can be a “reasonable term and condition” of the employment of an estate professional.  Compare id. at 76-78 with Hungry Horse, 574 B.R. at 747.  This disagreement, however, raises new questions for Delaware practitioners—will the Bankruptcy Court for the District of Delaware invalidate any employment terms in a retention agreement that solely benefit the estate professional?

As Cole Schotz previously reported here, the Supreme Court held in Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158 (2015) that bankruptcy attorneys may no longer bill the debtor’s estate for fees incurred by the professional while defending its own fees from challenges.  The Supreme Court reached this conclusion by looking to the language of 11 U.S.C. § 330(a)(1), which provides that a professional employed by the estate may receive “reasonable compensation for actual, necessary services rendered by” the professional.  ASARCO, 135 S. Ct. at 2165 (emphasis in original) (quoting 11 U.S.C. § 330(a)(1)).  As the Supreme Court saw it, when a professional is defending its own fees from challenge, it is not “rendering a service” to the estate.  Id. at 2165-66.

11 U.S.C. § 328(a), in contrast, provides that a debtor, “with the court’s approval, may employ or authorize the employment of a professional person on any reasonable terms and conditions of employment… .”  (emphasis added).  In Boomerang, however, Judge Walrath concluded that “ASARCO prevents the Court from concluding that section 328 permits defense fees even if they were routinely allowed by the market in bankruptcy or non-bankruptcy contexts prior to that ruling.”  548 B.R. at 78.  As we previously detailed here, Judge Walrath’s opinion was subsequently followed by many of the other judges in the District of Delaware in unpublished letter rulings.

Judge Thuma disagreed.  Hungry Horse, 574 B.R. at 747.  He felt that ASARCO, decided in the context of § 330(a), did not reach the question of whether a “fees on fees” provision was a reasonable term of employment under § 328(a).  Id.  Judge Thuma also emphasized a fundamental point of disagreement with the Bankruptcy Court for the District of Delaware—namely, that “an employment term must benefit the estate to be reasonable.”  Id.  As Judge Thuma explained, retention agreements commonly contain numerous terms solely for the benefit of the professional.  Id. (providing examples such as returned check fees, guarantees of payment, liens on recovery, and retainer requirements).  Judge Thuma held that even if a retention provision directly benefits only the professional, the estate benefits indirectly because such terms are necessary for “the client [to] obtain[] the services of needed, able professionals.”  Id.

Judge Thuma’s holding—and the distinction he drew with Boomerang—raises an interesting question: will the Bankruptcy Court for the District of Delaware invalidate any employment term that solely benefits the estate professional?  That could be the case—Judge Walrath explicitly stated in Boomerang that “[t]he fee defense provisions are not reasonable terms for the employment of Committee Counsel because they do not involve any services for the Committee.  Rather, they are for services performed by Committee Counsel only for their own interests.“  Boomerang, 548 B.R. at 75.  It is not clear that Judge Walrath’s decision was intended to be read to encompass terms of employment other than the “fees on fees” provisions addressed in ASARCO.  However, if taken to the extreme, Boomerang could be read for the proposition that all of the provisions Judge Thuma listed in Hungry Horse are subject to challenge in the Bankruptcy Court for the District of Delaware if they appear in a retention agreement.

As yet, challenges to these sorts of provisions in a retention agreement do not appear common.  More importantly, retainers are safe—they are among the type of “reasonable terms” specifically enumerated in section 328(a).  Nonetheless, Judge Thuma’s list of employment terms that could be construed to solely benefit the professional would pose concerns for practitioners in the District of Delaware, if Boomerang were to be read as going beyond the limited ruling in ASARCO.  And it is not difficult to imagine other employment terms not listed by Judge Thuma that solely benefit a professional: limitations on the scope of the engagement and restrictions on a client’s authority to direct the application of a retainer are just a few examples.

It should be noted that Judge Thuma recognized and offered a solution to another problem noted in Boomerang—namely, that the estate (which actually pays the fees of the creditors’ committee’s professionals) is not the party who retains those professionals.  As Judge Walrath explained, a retention agreement between a creditors’ committee and its counsel cannot “bind the estate, which is not a party to it.”  Boomerang, 548 B.R. at 75.  Judge Thuma, instead, proposes that there should always be a level playing field—if the debtor’s professionals receive a “fees on fees” provision, so too must the committee’s professionals.  Hungry Horse, 574 B.R. at 748.  Presumably, this provision in favor of the committee’s professional must be in the debtors’ professionals’ retention agreement (so that the estate is a party to the agreement containing the fees on fees provision for the committee’s professionals).

Finally, Hungry Horse makes clear that the law is not yet settled in the post-ASARCO world.  It remains to be seen whether other courts will embrace Boomerang or Hungry Horse.  Debtors’ professionals nationwide, of course, will keep their fingers crossed for the latter.

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Scottish Holdings, Inc., Charlotte, NC based reinsurance company, has, along with a single affiliate, filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-10160).  Scottish’s Petition estimates its assets and liabilities to both be between $1–$10 billion.  Scottish’s parent (a non-debtor entity), Scottish Re Group Limited, has commenced voluntary winding up procedures in the Cayman Islands and Bermuda.  According to the First Day Declaration, Scottish ceased writing new business in 2008, and has filed for Chapter 11 in order to address a debt overhang.  Scottish enters Chapter 11 intending to sell substantially all of its assets under Section 363 with HSCM Bermuda Fund Ltd., an investment fund advised by Hudson Structured Capital Management Ltd., serving as the Stalking Horse.

Contact Norman L. Pernick or Nicholas J. Brannick for more information regarding this matter.  Please note, however, that Cole Schotz P.C. does not represent the debtors in these cases and cannot respond to questions directed toward the debtors.

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PES Holdings, LLC (d/b/a Philadelphia Energy Solutions) has, along with eight of its subsidiaries and affiliates, filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-10122).  Headquartered in Philadelphia, PA, PES operates the largest oil refining complex on the East Coast and is the tenth largest refiner in the United States.  PES’ Petition estimates both its assets and liabilities to be between $1 – $10 billion.  PES enters bankruptcy with a prepackaged Plan of Reorganization.  According to PES’ Disclosure Statement, the Plan is supported by “100% of the outstanding Term Loan A Claims and over 90% of the outstanding Term Loan B Claims,” who have entered into an Restructuring Support Agreement with PES.  The Disclosure Statement also explains that the Plan contemplates a debt for equity swap, which will reduce PES’ anticipated debt service obligations by approximately $35 million per year and relieve PES of debt maturities through 2022, and will also provide an infusion of approximately $260 million in capital to PES.  A First Day Declaration has not yet been filed.  Rust/Omni is the proposed claims and noticing agent.  The cases have been assigned to the Honorable Kevin Gross.

Contact Norman L. Pernick or Nicholas J. Brannick for more information regarding this matter.  Please note, however, that Cole Schotz P.C. does not represent the debtors in these cases and cannot respond to questions directed toward the debtors.

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