Bankruptcy News

Gibson Brands Amended Plan and Disclosure Statement Filed

Gibson Brands filed with the U.S. Bankruptcy Court an Amended Joint Chapter 11 Plan of Reorganization and related Disclosure Statement. According to the Disclosure Statement, “The Plan provides that upon emergence from these Chapter 11 Cases, the Debtors will satisfy the $135 million to $139 million of DIP Facility Claims that may be outstanding under the DIP Facility as of the Effective Date through a conversion to equity or ‘takeback paper’. Specifically, pursuant to the Restructuring Support Agreement, the Required Lenders shall elect, in their sole discretion after consulting with the Debtors, to either (i) convert all of the remaining DIP Facility Claims to New Common Stock at a price per share equal to 80% of Plan Value, (ii) refinance all of the remaining DIP Facility Claims with ‘takeback paper’ in the form of a New Take-Out Facility secured by liens junior to the New Exit ABL Facility, or (iii) satisfy the remaining DIP Facility Claims through a combination of (i) and (ii)…. Jefferies has concluded that the Enterprise Value of the Reorganized Debtors, as of an assumed effective date of September 30, 2018 (the ‘Assumed Effective Date’), will range from approximately $360 million to approximately $430 million, with a midpoint of approximately $395 million. The Debtors separately assumed the value of the Debtors’ 54.4% equity interest in TEAC to be approximately $61 million based on the volume-weighted average price (“VWAP”) over the prior 90 trading days ended July 6, 2018. The range of Enterprise Values together with the assumed value of the equity interest in TEAC represents the distributable value of the Reorganized Debtors. This valuation assumes the Debtors emerge with an undrawn revolving credit facility and therefore distributable equity value (the ‘Distributable Equity Value’) is assumed to range from approximately $421 million to approximately $491 million, with a midpoint of approximately $456 million.”

Orexigen Therapeutics Previously Omitted Contracts Schedule Amended

Orexigen Therapeutics filed with the U.S. Bankruptcy Court a supplement to Schedule 3.8 of the Asset Purchase Agreement, dated April 23, 2018, by and between Orexigen Therapeutics, as the Seller, and Nalpropion Pharmaceuticals. The supplement includes a list of “Previously Omitted Contracts.”

The Rockport Company Consumer Privacy Ombudsman Report Filed

The Rockport Company’s Consumer Privacy Ombudsman filed with the U.S. Bankruptcy Court a report on the transfer of PII to CB Marathon Opco, LLC. The report states, “It is the Consumer Privacy Ombudsman’s understanding that Rockport, LLC, et al (hereafter ‘Debtors’ or ‘Rockport’) seeks to sell all customer information to CB Marathon Opco, LLC (the ‘Purchaser’), an affiliate of Charlesbank Equity Fund IX Limited Partnership….The Ombudsman respectfully submits the following recommendations to the Court: First, the Court should approve the transfer of all consumer Personally Identifiable Information (PII) from Debtors to Purchaser; Second, in accordance with governing law permitting the transfer of PII, the Court should require that: a. As the transfer of PII is to a ‘Qualified Buyer’: A ‘Qualified Buyer’ means an entity that: (i) concentrates in the same business and market as Debtor; (ii) expressly agrees to be Debtors’ successor-in-interest as to the customer information; (iii) agrees to be responsible for any violation of that policy following the date of purchase; and (iv) shall not disclose, sell, or transfer customers’ PII to any third party in a manner inconsistent with Debtors’ Privacy Policy without obtaining each customer’s prior affirmative (‘Opt-in’) consent.”

Elements Behavioral Health Objection Filed

Bexar County, City of Frisco, Dallas County and Harris County (jointly the “Tax Authorities”) filed with the U.S. Bankruptcy Court an objection to Elements Behavioral Health’s Sale Motion (Docket No. 19). The Tax Authorities assert, “Although the Sale Motion provides for the tax liens to attach to the sale proceeds this does not adequately protect the tax liens and claims as required by 11 U.S.C. section 363(e). The proceeds from the sale of the Tax Authorities’ collateral constitute their cash collateral, and they object to the use of the collateral to pay any other creditors of this estate. Pursuant to 11 U.S.C. section 363(c) (4), absent consent by the Tax Authorities or an order of the Court permitting use of the cash collateral, the Debtors ‘shall segregate and account for any cash collateral’ in their possession. The Debtors have not filed a motion seeking to use the Tax Authorities’ cash collateral, nor has there been notice or a hearing on the use of the collateral. Accordingly, absent consent, a segregated account must be established from the sale proceeds to comply with the requirements of section 363(c)(4). These proceeds from the sale the Tax Authorities’ collateral should not be distributed to any other party unless and until its claims, including any interest thereon as allowed under 11 U.S.C. sections 506(b), 511 and 1129, are paid in full. In the event of a credit bid, there may be no sale proceeds to which the liens can attach or which may be used to pay the claims of the Tax Authorities. If there is a credit bid by a junior lienholder, the property should be sold subject to the senior tax liens or the liens should be paid at closing. A credit bid by a junior lienholder is an attempt to avoid the consequences of foreclosing/seizing the property under applicable non-bankruptcy law, which would require it to take the property subject to the tax liens. There is no legal or equitable basis for thus subordinating or avoiding the tax liens. Absent provisions for the adequate protection of the tax liens, the Tax Authorities to the approval of a sale on a credit bid.”

Color Spot Nurseries Objection Filed

SAP America filed with the U.S. Bankruptcy Court an objection to Color Spot Nurseries’ Sale Motion (Docket No. 64). The SAP America objection asserts, “Neither the Sale Motion nor the Cure Notice overtly proposes to assume and assign the Software License Agreement to a potential purchaser. However, upon information and belief, the Debtors intend to transfer SAP’s Software as part of the Asset Sale. The Software License Agreement provides Color Spot with the non-exclusive right to use SAP’s copyrighted Software through the term of the license. No rights of ownership in the Software were transferred to Color Spot under the Software License Agreement, and SAP (and its licensors) retains ownership of the Software Under applicable federal copyright law, a non-exclusive license of copyright rights such as the Software License Agreement is not assignable without permission of the copyright owner….In addition, the Software License Agreement specifically prohibits (i) transfer of the Software License Agreement or any rights arising thereunder absent SAP’s consent and (ii) use of the Software by or for the benefit of third parties….SAP objects to the use of the Software by, or for the benefit of, a purchaser unless the Software License Agreement is assumed and assigned to such purchaser subject to SAP’s consent. In addition, upon assignment, any purchaser is prohibited from using the Software for the benefit of the Debtors.”

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