United States: 2017 Corporate Reorganization & Bankruptcy Mid-Year Review


Republic Airways

After a 14-month successful restructuring, Republic Airways Holdings Inc. emerged from bankruptcy protection as a privately held company.

In April, U.S. Bankruptcy Judge Sean Lane approved Republic's Chapter 11 exit plan, which will position Republic for long-term success and preserve 5,200 jobs. "The case has had quite a few things go on in it and has come a long way since it was filed," Judge Lane said.

Republic filed for bankruptcy protection in February 2016 due to a pilot shortage and labor costs. Over the past year, the company restructured $3.6 billion in liabilities; modified codeshare agreements with partner airlines; streamlined its operating aircraft fleet to a single line; and returned "out-of-favor" aircraft that didn't meet the company's needs.

CST Industries

Hughes Hubbard is representing CST Industries, the world's largest and leading tank and dome manufacturer, in its Chapter 11 proceedings to facilitate a corporate restructuring to right-size the Kansas City-based company's balance sheet and potentially sell its assets through a section 363 or 1123 sale.

Following a contested evidentiary hearing, HHR won interim approval for CST to borrow up to $14 million of superpriority debtor-in-possession financing. HHR also won approval for the company to make customary "first day" payments to key constituents such as employees and critical vendors.

GulfMark Offshore

Our team represented DNB Bank ASA (DNB) as a prepetition lender and debtor-in-possession (DIP) lender in connection with the Chapter 11 bankruptcy of GulfMark Offshore Inc. (GulfMark) in Delaware Bankruptcy Court.

By providing DIP financing, DNB was able to preserve its existing collateral, gain further collateral and limit the offshore operator's bankruptcy to a "HoldCo Only" filing, significantly simplifying the transaction and corresponding risk to its existing extended loans.

In what Judge Kevin Gross agreed was an "unusual" approach when signing the DIP order, DNB is providing up to $35 million of postpetition funding to GulfMark Rederi AS (Rederi), a Norweigian non-debtor subsidiary, through an amendment and restatement of an existing secured multicurrency credit facility already drawn down to $45 million. In turn, Rederi is onlending the funds to its parent debtor through an intercompany loan under a DIP intercompany facility.

Lehman Brothers

In a series of milestones towards completing the liquidation of Lehman Brothers Inc. (LBI), our team succeeded in:

  • Prevailing on the last contested customer claim against LBI
  • Distributing $228 million to unsecured Creditors
  • Winning court approval of $71 million rejection of claims

$62 Million Claim Expunged

In April, a Second Circuit panel affirmed the expungement of a claim by FirstBank Puerto Rico, which had sought to recover $62 million based on an interest-rate swap agreement that the bank entered into with another Lehman affiliate.

Unsecured Creditor Recovery Reaches 39%

In March, Judge Shelley C. Chapman granted our motion to pay out another $228 million to unsecured creditors of LBI, which raised recoveries for unsecured general creditors to $9 billion. With this distribution, the total amount recovered in the liquidation reached approximately $115 billion.

$71 Million of Claims Disallowed

In a bankruptcy court win, Judge Chapman granted our objection to five claims involving requests to transfer accounts out of LBI in the days immediately preceding LBI's liquidation. The transfers were not completed as requested due to the intervening liquidation. The trustee's successful objection, which was litigated over the course of two years, erases $71 million of claims against LBI.

Ultrapetrol (Bahamas) Ltd.

Hughes Hubbard steered Ultrapetrol (Bahamas) Ltd. out of bankruptcy only 53 days after the international shipping company filed for Chapter 11 protection, with $776 million in assets against $565 million in liabilities in its bankruptcy petition.

Following more than 18 months of negotiations and bankruptcy preparation, our group guided Ultrapetrol into Chapter 11 protection with a prepackaged plan in February. And despite a last-ditch effort by a minority shareholder to block the proposed restructuring, an uncontested confirmation hearing before U.S. Bankruptcy Judge Robert Drain took place on March 17, only 39 days after the case was commenced.

Judge Drain approved Ultrapetrol's plan and the company emerged from bankruptcy on March 31.

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