Alexandria, Va. — The latest American Bankruptcy Institute (ABI) podcast features ABI Editor-at-Large Bill Rochelle talking with Prof. Stephen Lubben of Seton Hall University School of Law about the ruling by the U.S. Court of Appeals for the Second Circuit denying General Motors’ escape from liability for ignition-switch defects that generated nationwide litigation. Prof. Lubben followed the case and has written extensively on GM’s bankruptcy on both Credit Slips and the New York Times DealBook blog.
Old GM, named General Motors Corp. before bankruptcy, was in severe financial distress and likely would have liquidated absent financial assistance from the federal government before and after its chapter 11 filing in June 2009. In the bankruptcy court’s 2009 sale approval order, New GM agreed to assume responsibility only for specified liabilities, including warranty claims, accidents occurring after the sale, and Lemon Law claims. Otherwise, the sale was supposedly free and clear of claims, thus broadly immunizing New GM from successor liability claims. In early 2014 – after plan confirmation in 2011 – New GM initiated recalls of millions of vehicles. It was later discovered that Old GM had known about a defect in its ignition switches for several years before bankruptcy. The bankruptcy court had held that pre-closing accident claims and claims for economic loss were barred by the sale order. The Second Circuit reversed that holding on due process grounds.
"The one clear lesson from this case is that if you want to have very good, clean 363 sale, you really have to push your client, especially on the debtor's side, to make sure that they are disclosing everything that they need to be disclosing," Lubben said.
Click here to listen to the podcast.
ABI’s podcast series features interviews with important figures or experts discussing timely bankruptcy topics or issues. ABI podcasts are freely available to members, the public and the press, and can be accessed on ABI’s Newsroom website.
###
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 12,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/calendar-of-events.
A consortium including China’s Giant Interactive Group, backed by billionaire Shi Yuzhu, is in talks to acquire Caesars Entertainment Corp.’s online game unit for more than $4 billion, Bloomberg News reported yesterday. The Giant-led group has emerged as the leading contender for the business after an auction process. Caesars Interactive is one of the largest players in the market for casino-style games on Facebook, with titles such as Slotomania and Bingo Blitz. The business is projected to generate earnings before interest, taxes, depreciation and amortization of more than $360 million this year. That’s an increase of at least 27 percent from the $282.7 million ebitda reported for last year, according to a filing.
Terraform Global Inc. said that bankrupt solar company SunEdison Inc. is looking to sell its interest in the "yieldco,” Reuters reported yesterday. The two companies are in "active discussions" for a joint sale process of the stake, Terraform Global said in a regulatory filing. Terraform Global also said its annual filing for 2015 may include a "going concern" note due to risks related to SunEdison bankruptcy, but said it had sufficient liquidity to support ongoing operations. SunEdison's two publicly traded subsidiaries, TerraForm Global and TerraForm Power Inc, were not part of the bankruptcy filing.
Sports Authority is scrambling to close the doors on most or all of its stores by the end of the month, according to multiple store employees and managers, an abrupt move that comes amid a fight over cash between lenders and suppliers, the Wall Street Journal reported today. Managers have been instructed on procedures for wiping the computers, locking up and walking away, as the dying athletic gear seller prepares for the final stage of its bankruptcy. A lawyer and officials of the Englewood, Colo., company didn’t respond to requests to discuss the accelerated shutdown plan, including questions about whether any stores would survive into August. In a May 25 letter to customers, Chief Executive Michael Foss said that the stores would be closed by the end of August. The end could be nearer than that for most Sports Authority stores, said store managers who were summoned to a conference call last week. Sports Authority and the nearly 14,000 jobs it once supported is essentially done at the end of July, they were told.
Teen clothing chain Aeropostale Inc. is preparing to sell all its assets and may bring claims against the private equity firm that it said drove it into bankruptcy, Bloomberg News reported yesterday. The New York-based company said in court papers on July 15 that “reorganization on a standalone basis is not feasible.” Instead, it will look for a “stalking horse” to make the lead bid at an auction next month and will pass the proceeds of any sale to creditors. The retailer also said it’s still reviewing 11,000 pages of documents and depositions of key individuals that senior lender Sycamore Partners produced during a bankruptcy probe and is evaluating whether to pursue claims against the private equity firm and affiliates. Aeropostale entered bankruptcy in May, saying that Sycamore used a supplier it controlled to trigger the filing. The retailer also says that the private equity firm controls its biggest secured lender, Aero Investors LLC, an agent to a $150 million term loan.
Caesars Entertainment Corp. and Caesars Acquisition Co. have amended their proposed merger agreement, which is intertwined with the $18 billion bankruptcy of the casino company's main operating unit, Reuters reported yesterday. The operating unit, Caesars Entertainment Operating Co Inc. (CEOC) received approval from a bankruptcy judge last month to begin seeking votes from creditors on its plan to restructure its debt and exit bankruptcy. The bankruptcy plan would slash $10 billion of debt and split the CEOC unit into a new operating company and a real estate investment trust. Caesars Entertainment is contributing billions of dollars of cash and equity to CEOC and that will help repay CEOC's creditors. Some of that cash will be generated by merging Caesars Entertainment with Caesars Acquisition. The merger was originally proposed in December 2014. Under the amended terms, Caesars Acquisition shareholders will receive 27 percent of the merged entity. Under the original proposal, they would have received 38 percent, according to regulatory filings. Caesars Acquisition owns Planet Hollywood Resort & Casino in Las Vegas and Harrah's New Orleans, among other assets, which were acquired from the CEOC operating unit before its bankruptcy. The Caesars Entertainment parent has said those acquisitions were done at fair value to relieve the CEOC unit of capital intensive projects. CEOC's junior creditors, led by Appaloosa Management, said those deals stripped billions of dollars of the best assets from the operating unit, leaving it bankrupt.
