Bankruptcy News

Quadrant 4 System Extension Sought

Quadrant 4 System (Q4) and Stratitude filed with the U.S. Bankruptcy Court a motion to extend the exclusive period during which the Company can file a Chapter 11 plan and solicit acceptances thereof through and including April 25, 2018 and June 24, 2018, respectively. The motion explains, "This is Q4's second request and Stratitudes's first request for extension of the Exclusivity Periods. Notwithstanding the requested maintenance of exclusivity, the Debtors anticipate that any plan or plans it will file in the Chapter 11 Cases will be proposed jointly with the Committee….Since their respective Petition Dates, the Debtors' attention has been singularly focused on selling substantially all their assets - efforts that have paid off for their creditors by generating a large pool of money for their estates and for the benefit of both secured (e.g., paying down a large portion of the secured debt) and unsecured creditors (e.g., assumption and assignment of leases and executory contracts, and assumption of certain employee claims). The respective directors, officers and management of the Debtors overlap significantly. Stratitude's assets served as collateral for Q4's secured lenders….[T]he Chapter 11 Cases were filed in less than ideal circumstances as a result of the Criminal Action, the SEC Action, and the action of the Criminal Defendants. These actions have required additional time and effort on the Debtors' part to complete their Schedules and Statement of Financial Affairs, and have generally complicated the fact-gathering process for many of the motions filed and presented to date." The Court scheduled a January 23, 2018 hearing on the extension motion.

Rentech Sale Order Revised

The U.S. Bankruptcy Court docket reflects a certification of counsel regarding an order authorizing the Rentech Debtors to sell the assets of the non-debtor NEWP subsidiaries. The document notes, "Exhibit 1 is a revised form of order (the 'Revised Order') that authorizes the Debtors to approve the sale of non-Debtor subsidiary New England Wood Pellet, LLC. The Debtors have resolved the U.S. Trustee's and Creditors' Committee's informal comments and the Creditors' Committee's Objection on the terms memorialized in the Revised Order." The revised order states, "The objection to the Motion filed by the Official Committee of Unsecured Creditors related to the NEWP APA is resolved. Nothing herein shall prejudice any party-in-interest's rights to object to or otherwise take a position with respect to the Motion as it relates to the Fulghum APA, all of which rights are reserved in all respects. The Debtors are authorized, but not directed, to take all such corporate actions as are desirable or necessary to cause New England Wood Pellet, LLC, Schuyler Wood Pellet, LLC and Deposit Wood Pellet, LLC (collectively, the 'Sellers') to monetize substantially all of their assets pursuant to the NEWP APA including approving, effectuating and consummating the Sales. Debtor Rentech, Inc will not be required to obtain shareholder approval for its consent to the sale of assets by Sellers."

Walter Investment Management Plan Confirmed

The U.S. Bankruptcy Court issued an order confirming Walter Investment Management's Amended Prepackaged Chapter 11 Plan of Reorganization [Modified], and the Company anticipates emerging from Chapter 11 protection by January 31, 2018. The financial restructuring is expected to reduce the Company's outstanding corporate debt by approximately $800 million. In connection with the confirmation order, Walter Investment Management also announced the proposed composition of its post-emergence board, which will be comprised of nine directors: Current directors George Awad, Daniel Beltzman and Neal Goldman will continue to serve as directors. Frederick Arnold, David Ascher, Seth Bartlett, Claude LeBlanc, Thomas Marano and Thomas Miglis, who have each been designated by an ad hoc group of consenting senior noteholders, will also serve as directors. As previously reported, "On the Effective Date, holders of Senior Notes Claims will receive, in full and final satisfaction of their Allowed Senior Notes Claims, their Pro Rata share of (i) New Second Lien Notes, (ii) Mandatorily Convertible Preferred Stock, and (iii) 100% of the New Common Stock issued on the Effective Date, subject to dilution by shares of New Common Stock issuable on conversion of the Mandatorily Convertible Preferred Stock and shares of New Common Stock issued or issuable pursuant to the Management Incentive Plan and shares of New Common Stock issued after the Effective Date; provided that, if Class 6 (Convertible Notes Claims) is an Accepting Class, (a) 50% of the New Common Stock that would have otherwise been distributable to Class 5 pursuant to the terms set forth above, shall be distributed to holders of Convertible Notes Claims in accordance with Section 4.6(b) of the Plan, and (b) 50% of the New Common Stock that would have otherwise been distributable to Class 5, shall be distributed to holders of Existing Equity Interests in accordance with Section 4.9(b) of the Plan." This mortgage loan servicer filed for Chapter 11 protection on November 30, 2017, listing $17 billion in pre-petition assets.

Cumulus Media Incentive Program Approval Sought

Cumulus Media filed with the U.S. Bankruptcy Court a motion authorizing the Debtors to continue certain pre-petition incentive compensation programs. The motion explains, "Currently, 11 individuals participate in the short-term and/or long-term incentive programs (the 'Quarterly Incentive Plan' or 'QIP,' and the 'Supplemental Incentive Plan' or 'SIP', respectively), four of whom are 'insiders' pursuant to section 101(31) of the Bankruptcy Code; the remaining employees eligible under the programs are not insiders. Each one of the Incentive Compensation Programs, including the QIP and SIP, is based on achieving financial or operational performance targets. Each of the performance targets supports achievement of Board-approved consolidated Company EBITDA budgets, and many of the programs (including the QIP and the SIP) have as targets Board-approved consolidated Company EBITDA budgets of $210 million in 2017 and $236 million in 2018 (the 'Board-Approved EBITDA Targets'). The 2018 Board-Approved EBITDA Target, which represents a 12% increase over the 2017 Board-Approved EBITDA Target, is a challenging target for the Debtors to meet, particularly in light of current industry headwinds….[T]he Board approved an ambitious EBITDA target for the QIP and SIP of $236 million in 2018, a 12% increase over the comparable 2017 EBITDA target, which EBITDA target is also supported by the 2018 performance targets specific to the other Incentive Compensation Programs….To align compensation with performance, as part of their employment agreements, most of the Debtors' market leadership employees are eligible to participate in a program that has an 'at risk' compensation feature (the 'Market Manager Incentive Compensation Program') based on the following standard formula: - 50% of total bonus opportunity: an amount equal to 4.125% or 5.5% of annual salary is payable quarterly based on the achievement of quarterly market-level EBITDA targets; and - 50% of total bonus opportunity: an amount equal to 16.5% or 22% of annual salary is payable annually based on the achievement of annual market-level EBITDA targets." The SIP motion continues, "The six (6) eligible employees under the SIP are: (a) the Debtors' CEO, CFO and general counsel, (b) the President of Westwood One, and (c) the two executive vice presidents who manage the operations of the Radio Station Group (collectively, the 'SIP Participants')." The Court scheduled a February 8, 2018 hearing to consider the motion, with objections due by February 1, 2018.

Armstrong Energy Objection Filed

Louisville Gas and Electric (LG&E) and its affiliated Kentucky Utilities (KU) filed with the U.S. Bankruptcy Court an objection to Armstrong Energy's Second Amended Joint Plan of Reorganization. The objection asserts, "A material aspect of the Plan is the Debtors' anticipated assumption of contracts under which they sell coal to LG&E and KU and the assignment of those contracts to an affiliate ('NewCo') of Knight Hawk Holdings, LLC and certain secured creditors of the Debtors. The Debtors, Knight Hawk, LG&E and KU have negotiated an agreement in principle regarding the terms of those assumptions and assignments, but are still memorializing those discussions and resolving the last points. As a result, the Plan does not yet reflect the anticipated assignment terms. LG&E and KU object to the assumption and assignment of any contracts to which either is party, and to confirmation of any Chapter 11 plan, on any terms affecting either of them other than those now being memorialized. This Limited Objection is likely to be resolved in the near future with additional language in a new version of the Plan, in a confirmation order, or both."

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