In chapter 11 bankruptcy cases, it is not uncommon for secured parties/lenders to provide a “carve-out” for various professional fees. Frequently there may be a “carve-out” for “all chapter 11 professionals” or the “carve-out” may be broken out in different amounts for the debtor’s professionals as opposed to, for example, Creditors’ Committee professionals. These “carve-outs” can often be in a Cash Collateral Order (assuming the debtor is using the secured party’s collateral) or in a DIP Order (debtor-in-possession financing). So what does a carve-out mean?

Bankruptcy & Corporate Restructuring Bulletin

On January 30, 2017, Louisiana Medical Center and Heart Hospital, LLC, a 132-bed acute-care hospital located in the heart of St. Tammany Parish in Lacombe, Louisiana, filed for bankruptcy. As reported in papers filed with the bankruptcy court, Louisiana Medical failed in its effort to sell its hospital as a going concern prior to commencing its bankruptcy case and is now swiftly winding down its operations due to continuing losses.

In the recent decision ofSpizz v. Goldfarb Seligman & Co. (In re Ampal-American Israel Corp.), 2017 WL 75750 (Bankr. S.D.N.Y. Jan.

In Dore v. Sweports, Ltd., C.A. No. 10513-VCL (Del. Ch. January 31, 2017), plaintiffs John A. Dore, Michael J. O’Rourke, and Michael C. Moody (together, “Plaintiffs”) sought indemnification under the Delaware General Corporation Law (“DGCL”) and corporate bylaws, for expenses incurred in connection with three legal proceedings that occurred in Illinois, as well as those incurred enforcing their indemnification rights in Delaware.

Background

In chapter 11 reorganizations, Federal Rule of Bankruptcy Procedure 3003(c)(3) provides that “[t]he court shall fix and for cause shown may extend the time within which proofs of claim or interest may be filed” (commonly known as the bar date). For a creditor or interest holder to be subject to this bar date, they must have received notice to satisfy due process. A known creditor, one that is reasonably ascertainable, must receive “actual notice.” Simply receiving a court-approved bar date notice from the debtor is enough to satisfy this requirement for due process.

Judge Christopher Sontchi recently issued an important opinion in the Molycorp chapter 11 case.

When lenders take an aggressive approach to a financially troubled borrower that ultimately files for bankruptcy protection, stakeholders in the case, including chapter 11 debtors, trustees, committees, and even individual creditors or shareholders, frequently pursue causes of action against the lenders in an effort to augment or create recoveries.

The influential Delaware bankruptcy court issued a recent decision that all secured lenders need to be aware of. In this decision, the bankruptcy court held that the fees of the official creditors’ committee were not limited by the dollar-amount cap in the financing order because the debtors confirmed their chapter 11 plan. The creditors’ committee argued that it was entitled to over $8 million in fees while the secured lender asserted that the committee’s fees were capped at $250,000 due to what the bankruptcy court referred to as a “standard carve-out provision” in the financing order.

ATopTech, Inc. (“ATopTech” or “Debtor”), an electronic design automation software company manufacturing software solutions for engineers to assist them in the physical design of integrated circuits, filed a voluntary petition for chapter 11 bankruptcy relief on January 13, 2017 in the United States Bankruptcy Court for the District of Delaware.

In addition, ATopTech filed a motion to sell its businesses under section 363 of the Bankruptcy Code and has selected a stalking horse bidder. The Debtor expects that the sale will be completed by March 31, 2017.

Status: Upcoming/New Filing

Acquirer: Draper Athena

Acquired: ATopTech, Inc. (US)

Industry: Software