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Client Alert: Roust Corporation's Prepackaged Chapter 11 Plan Approved in 1 Week

January 31, 2017

On January 6, 2017, Judge Drain of the United States Bankruptcy Court for the Southern District of New York (the "Court") approved Roust Corporation's and certain of its affiliates' (collectively, the "Debtors") chapter 11 prepackaged plan (the "Plan") a mere one week after their bankruptcy filing based on a finding that Bankruptcy Rule 2002(b)'s requirement of 28 days' notice of a confirmation hearing can be satisfied before a petition for chapter 11 relief is filed. The speed of this confirmation may set a precedent for future prepackaged bankruptcy cases.

The Debtors distributed the Plan and a corresponding Disclosure Statement to the appropriate parties as part of a pre-bankruptcy solicitation on December 1, 2016.  The Debtors filed for bankruptcy protection on December 30, 2016 seeking confirmation and approval of the Debtors' assumption of a restructuring support agreement supported by holders of approximately 90% of the Debtors' senior notes and approximately two-thirds of the Debtors' convertible notes, in one week at a confirmation hearing on January 6, 2017 (the "Confirmation Hearing"). The senior noteholders and convertible noteholders were the only applicable creditors impaired under the Plan.

The U.S. Trustee filed an objection to confirmation and the related relief sought, arguing that the Plan was being pushed through at an "unprecedented speed" without a proper notice period.  The U.S. Trustee went as far as stating that approval of the unjustified expedited relief sought would "make a mockery of the bankruptcy process."

Despite the U.S. Trustee's objection, the Court confirmed the Plan at the Confirmation Hearing holding that the Plan was properly solicited to creditors and notice was sufficient under the applicable rules.  Bankruptcy Rule 2002(b) requires 28 days' notice of a confirmation hearing and disclosure statement hearing.  The Court held that this rule calls only for 28 days' notice, not 28 days' notice after the bankruptcy petition date.  This notice requirement was satisfied by the solicitation process beginning on December 1, 2016.  Judge Drain noted that he found three unreported cases where the debtors' plans were confirmed even quicker than the Debtors' Plan.

Indenture trustees, agents, and investors should be aware of the Court's ruling as this could set a new precedent for confirming chapter 11 prepackaged bankruptcy plans in extremely short timeframes.  It should be noted that Judge Drain emphasized that his decision on the timing of this case was based on the particular facts of this case, including the sophistication and limited number of affected creditors, as general unsecured creditors are to have their claims reinstated and paid in full.

Seward & Kissel is available to assist you with any inquiries regarding this client alert.  Please contact Kal Das at das@sewkis.com (212-574-1391); John Ashmead at ashmead@sewkis.com (212-574-1366); Ronald Cohen at cohen@sewkis.com (212-574-1515); or Gregg Bateman at bateman@sewkis.com (212-574-1436).


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Seward & Kissel LLP has long been considered a leading law firm in the financial services industry, particularly in the role of advising domestic and international banks and financial institutions in respect of complex and innovative structures.  The Practice Group is globally recognized to be the largest and the leading group of its type in the world, advising banks and financial institutions in the Americas, Europe and Asia.


Lawyers in the Practice Group represent banks and financial institutions as trustees, master servicers, servicers, bondholders, investors, distressed trade brokers, hedge fund administrators and liquidity providers in financing transactions and are therefore thoroughly familiar with issues that arise from all sides of a transaction.  Lawyers in the Practice Group regularly work on (i) domestic and international transactions and restructurings involving Asset Backed Securities, Mortgage Backed Securities (including custody related matters) CLOs, Commercial Paper (traditional and conduit), Conventional Debt, Syndicated Debt, Project Finance, Bank Finance, Municipal Finance, Institutional Finance, Transportation Finance, ADRs, GDRs, Auction Rate Securities, Cross Border Transactions (involving Asia, Europe and Latin America), Derivatives/Credit Default Swaps and other related matters, (ii) tickler audits and reviews, and acquisitions of businesses by banks and financial institutions, (iii) litigation arising from such transactions and restructurings, including mortgage repurchase litigation; (iv) distressed debt trading, (v) hedge fund administration and (vi) regulatory issues (bank, securities, commodities and Investment Company Act) with respect to the foregoing.


This publication is provided by Seward & Kissel LLP as a service to clients and colleagues.  The information contained in this publication should not be construed as legal advice.  If you have any questions, please feel free to contact any of the attorneys in our Global Bank and Institutional Finance & Restructuring Practice Group.