Bankruptcy & Restructuring – Page 3

Weekly Bankruptcy Alert March 24, 2025 (For the Week Ending March 23, 2025)

Covering reported business bankruptcy filings in Massachusetts, Maine, New Hampshire, and Rhode Island, and Chapter 11 bankruptcy filings in New York and Delaware listing assets of more than $1 million.
Because your business extends beyond the borders of a single state, ours does too. Today, we are a multi-disciplinary team of highly creative, hard working, responsive, business savvy and experienced bankruptcy and creditors’ rights professionals serving you from offices located in four New England states and the District of Columbia.

Chapter 11

Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate

7Q59 Amherst, LLC(Hadley, MA)
Real Estate and Rental and Leasing
Springfield(MA)
$1,000,001to$10 Million
$1,000,001to$10 Million
3/17/25

Village Roadshow Entertainment Group USA Inc.2(West Hollywood, CA)
Motion Picture and Video Industries
Wilmington(DE)
$100,000,001to$500 Million
$500,000,001to$1 Billion
3/17/25

MOM CA Investor Group LLC(Newport Beach, CA)
Management of Companies and Enterprises
Wilmington(DE)
$50,000,001to$100 Million
$10,000,001to$50 Million
3/17/25

MOM BS Investor Group LLC(Newport Beach, CA)
Management of Companies and Enterprises
Wilmington(DE)
$10,000,001to$50 Million
$10,000,001to$50 Million
3/17/25

MOM AS Investor Group LLC(Newport Beach, CA)
Management of Companies and Enterprises
Wilmington(DE)
$10,000,001to$50 Million
$10,000,001to$50 Million
3/17/25

Greystone Property Development LLC(Roslindale, MA)
Construction
Boston(MA)
$1,000,001to$10 Million
$1,000,001to$10 Million
3/19/25

Maine Craft Distilling LLC(Portland, ME)
Not Disclosed
Portland(ME)
$500,001to$1 Million
$1,000,001to$10 Million
3/21/25

Danimer Scientific, Inc.3(Bainbridge, GA)
Resin, Synthetic Rubber and Artificial Synthetic Fibers and Filaments Manufacturing
Wilmington(DE)
$500,000,001to$1 Billion
$100,000,001to$500 Million
3/18/25

Benson Hill, Inc.(Saint Louis,4 MO)
Oilseed and Grain Farming
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
3/20/25

Chapter 7

Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate

Kiromic BioPharma, Inc.(Houston, TX)
Scientific Research and Development Services
Wilmington(DE)
$1,000,001to$10 Million
$10,000,001to$50 Million
03/21/25

1Business Type information is taken from Bankruptcy Court filings, which may include incorrect categorization by the debtor or others.
2Additional affiliate filings include: Crescent Film Holdings Limited, Village Roadshow Distribution (BVI) Limited, Village Roadshow Distribution Pty Ltd, Village Roadshow Distribution UK Limited, Village Roadshow Distribution USA Inc., Village Roadshow Entertainment Group (BVI) Limited, Village Roadshow Entertainment Group Asia Limited, Village Roadshow Film Administration Management Pty Ltd, Village Roadshow Films (BVI) Limited, Village Roadshow Films Global Inc., Village Roadshow Films North America Inc., Village Roadshow Holdings USA Inc., Village Roadshow Pictures Entertainment Inc., Village Roadshow Pictures North America Inc., Village Roadshow Productions (BVI) Ltd., Village Roadshow Productions Inc., Village Roadshow VS Films LLC, VR DTE Distribution USA Inc., VR DTE Productions Limited, VR Films Holdings (BVI) Limited, VR Funding LLC, VR Zoo Distribution USA Inc., VR Zoo Productions Ltd, VREG Films Ltd, VREG Funding LLC, VREG IP Global LLC, VREG J2 Global LLC, VREG MM2 IP Global LLC, VREG OP Global LLC, VREG Production Services Inc., VREG Television Inc., VREG Wonka IP Global LLC and VREG WW IP Global LLC.
3Additional affiliate filings include: Danimer Bioplastics, Inc., Danimer Scientific Holdings, LLC, Danimer Scientific Kentucky, Inc., Danimer Scientific Manufacturing, Inc., Danimer Scientific, LLC, Meredian Bioplastics, Inc., Meredian Holdings Group, Inc., Meredian Inc., and Novomer, Inc.
4Additional affiliate filings include: Benson Hill Fresh, LLC, Benson Hill Holdings, Inc., Benson Hill ND OldCo., Inc., Benson Hill Seeds Holding, Inc., Benson Hill Seeds, Inc., BHB Holdings, LLC, DDB Holdings, Inc., and J&J Southern Farms, Inc.

Entitled to Stay Relief? Prove it.

Bankruptcy is a headache for lenders.
For example, you make a commercial real estate loan and record your deed of trust. The borrower pays you for a time but then defaults. You tried loan forbearance and modification, but it was unsuccessful. The borrower falls further and further behind on the loan. You are left with no choice but to foreclose on your collateral.
You start a foreclosure special proceeding in state court. You pay your attorney and a foreclosure trustee. After what seems like forever — months of continuances, no payments, and possible depreciation of your collateral — the clerk of court authorizes the sale of the property. Another month goes by, and a sale is conducted. Your credit bid is the only bid for the property. Nine days of the upset bid period pass, and you are one day away from owning the property. Then, an unwelcomed companion arrives with your morning coffee: A NOTICE OF BANKRUPTCY CASE stamped with the official seal of the United States Bankruptcy Court.
Your borrower has filed for bankruptcy, and the automatic stay is in effect. You cannot complete the foreclosure. You do not own the property. Your loan is not off the books.
Now, you pay your attorney to represent you in the bankruptcy. The borrower has filed Chapter 11, says he intends to reorganize and needs the property to succeed. The bankruptcy case languishes for six months. Finally, the debtor concedes that reorganization is unlikely, and the bankruptcy court dismisses the case. You can now resume the foreclosure, but by law, you must conduct a new sale. You can’t just let the original upset bid run for the full 10 days. You conduct another foreclosure sale, you credit bid again, and nine days of the upset bid period pass. Then, in the words of Yogi Berra, it’s déjà vu all over again. Your borrower filed a second bankruptcy, and the automatic stay has blocked the completion of your foreclosure.
Now what? A creditor can move for relief from the automatic stay. This article focuses on real property collateral and when a debtor has schemed to delay, hinder, or defraud its creditors by transferring an interest in the property without permission or by filing multiple bankruptcy cases affecting the property.
A recent decision by the Honorable Ashley A. Edwards, the newly-appointed bankruptcy judge for the Western District of North Carolina, stresses the importance of proving the material facts necessary to pierce a debtor’s automatic stay shield.
Stay relief is an exception to the broad protections of bankruptcy afforded a debtor. The creditor must prove that the specific facts warrant it. Our illustration, with the back-to-back bankruptcy filings, looks like an easy win for the lender. However, the bankruptcy court denied the lender’s motion for stay relief. Why? Because it appears the lender filed a motion and did little else to establish the key facts to support stay relief.
The bankruptcy court pointed out that the lender offered no evidence at the hearing – no documents, exhibits, or witness testimony. The bankruptcy court also held that establishing a “scheme” is a heightened burden. Courts define “scheme” narrowly. The facts must establish a debtor’s “intentional artful plot or plan,” not just “misadventure or negligence.” Stay relief is appropriate where facts establish multiple property transfers without consideration to circumvent a creditor’s rights and remedies. Reliance on public records alone is insufficient. The court will want testimony from key participants in the scheme.
Despite the two bankruptcy filings during the upset bid period, sufficient facts remained unclear to the bankruptcy court to permit stay relief. Even with judicial notice of the multiple bankruptcies, the court required additional facts showing a scheme and relating to the use, tenancy, and status of the property.
This case underscores an important lesson: if you’re going to seek stay relief, follow the Powell Doctrine and deploy every relevant fact in your arsenal to support all the elements of your motion. Don’t simply file a motion, show up at the hearing, and expect the court to “get it.” Descend on the courthouse with your witnesses and exhibits and be ready to conduct a mini-trial. This is time-consuming and expensive, but it will put you in the best position to win.

Weekly Bankruptcy Alert March 17, 2025 (For the Week Ending March 16, 2025)

Chapter 11

Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate

SaaliRealty LLC(Lynn, MA)
Not Disclosed
Boston(MA)
$500,001to$1 Million
$500,001to$1 Million
03/11/25

Essential Minerals, LLC(New Castle, DE)
Not Disclosed
Wilmington(DE)
$1,000,001to$10 Million
$10,000,001to$50 Million
03/10/25

Retreat at Laguna Villas, LLC2(Newport Beach, CA)
Activities Related to Real Estate
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
03/10/25

Sugar Hill 473 LLC(New York, NY)
Lessors of Real Estate
Manhattan(NY)
$1,000,001to$10 Million
$1,000,001to$10 Million
03/12/25

F21 OpCo, LLC(Los Angeles, CA)
Clothing Store
Wilmington(DE)
$100,000,001to$500 Million
$1,000,000,001to$10 Billion
03/16/25

F21 Puerto Rico, LLC(Los Angeles, CA)
Clothing Store
Wilmington(DE)
$100,000,001to$500 Million
$1,000,000,001to$10 Billion
03/16/25

F21 GiftCo Management, LLC(Los Angeles, CA)
Clothing Store
Wilmington(DE)
$100,000,001to$500 Million
$1,000,000,001to$10 Billion
03/16/25

Brightmark Plastics Renewal LLC(San Francisco, CA)
Waste Treatment and Disposal
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
03/16/25

Brightmark Plastics Renewal Indiana LLC(San Francisco, CA)
Waste Treatment and Disposal
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
03/16/25

Brightmark Plastics Renewal Services LLC(San Francisco, (CA)
Waste Treatment and Disposal
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
03/16/25

Chapter 7

Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate

Coastal Craft Distributors Corp.(Fall River, MA)
Not Disclosed
Boston(MA)
Not Disclosed
Not Disclosed
03/11/25

Plaster Fun Time Limited(Framingham, MA)
Other Amusement and Recreation Industries
Worcester(MA)
$100,001to$500,000
$1,000,001to$10 Million
03/13/25

The Blinc Group, Inc.(New York, NY)
Miscellaneous Durable Goods Merchant Wholesalers
Manhattan(NY)
$1,000,001to$10 Million
$1,000,001to$10 Million
03/14/25

CMD Properties LLC(Narragansett, RI)
Activities Related to Real Estate
Providence(RI)
$1,000,001to$10 Million
$1,000,001to$10 Million
03/14/25

Wakefield Tavern LLC(Wakefield, RI)
Restaurants and Other Eating Places
Providence(RI)
$50,001to$100,000
$1,000,001to$10 Million
03/14/25

Catarina’s Italian Restaurant Inc.(Narragansett, RI)
Restaurants and Other Eating Places
Providence(RI)
$100,001to$500,000
$1,000,001to$10 Million
03/14/25

1Business Type information is taken from Bankruptcy Court filings, which may include incorrect categorization by the debtor or others.
2Additional affiliate filings include: MOM CA Investco LLC, MOM AS Investco LLC, MOM BS Investco LLC, Aryabhata Group LLC, 694 NCH Apartments, LLC, 777 AT Laguna, LLC, 891 Laguna Canyon Road, LLC, Cliff Drive Properties DE, LLC, Heisler Laguna, LLC, Hotel Laguna, LLC, Laguna Art District Complex, LLC, Laguna Festival Center, LLC, Sunset Cove Villas, LLC, Tesoro Redlands DE, LLC, 4110 West 3rd Street DE, LLC, 314 S. Harvard DE, LLC, Laguna HI, LLC, Laguna HW, LLC, The Masters Building, LLC and 837 Park Avenue, LLC.

U.S. Trustee Objects to Stalking Horse Bid Protections in Three Recent Delaware Bankruptcy Cases

Recently, the Office of the United States Trustee (the “UST”) has been objecting to debtors’ motions to establish bidding procedures to sell some or all of an estate’s assets pursuant to section 363 of the Bankruptcy Code. As highlighted in three recent Delaware cases, the UST has objected to stalking horse bid protections on a number of grounds, including: (a) when such protections would be payable; (b) the proposed priority classification for such protections; (c) the scope of the bid protections; and (d) whether the debtor has demonstrated that such protections benefit the estate and are necessary to preserve estate value. Understanding the UST’s concerns is critical when negotiating with a stalking horse bidder.
Jo-Ann Stores[1]
On January 15, 2025, the Jo-Ann Stores debtors filed chapter 11 bankruptcy petitions. Alongside the petition, the debtors filed a motion to approve bidding procedures and a stalking horse agreement with Gordon Brothers Retail Partners. The proposed bid protections for the stalking horse included (a) up to $500,000 for reasonable out-of-pocket expenses and (b) up to $1.6 million for the reasonable costs incurred to acquire signage for going-out-of-business sales. On February 5, 2025, the UST objected to the bidding procedures motion and raised the following points concerning the stalking horse agreement:

The stalking horse was an affiliate of the debtors’ prepetition lenders’ first-in-last-out (“FILO”) agent and therefore did not need to conduct significant due diligence or be induced to bid in exchange for its affiliate to be paid in full from the sale proceeds.
The initial minimum overbid of $2.2 million was too large and would chill bidding.
The bid protections were not eligible to receive super-priority administrative expense status because the stalking horse was not providing postpetition financing (section 364(c)(1)) and was not a secured creditor who received insufficient adequate protection for the postpetition diminution in value of their collateral (section 507(b)).
Because the debtors’ prepetition FILO agent was an affiliate of the stalking horse, the affiliated prepetition lenders should not be a consultation party or at least should be shielded from sharing information with the stalking horse.

The bankruptcy court ultimately agreed that as an affiliate of the stalking horse bidder, the prepetition FILO agent could not be a consolidation party during the bidding process but otherwise overruled the UST’s remaining objections.
Ligado Networks[2]
On January 6, 2025, a day after filing chapter 11 bankruptcy petitions, the Ligado Networks debtors filed a bidding procedures motion, which included a stalking horse agreement with AST & Science, LLC. If consummated, the stalking horse agreement would provide the debtors with hundreds of millions of dollars through several different payment streams (e.g., common stock, convertible notes, warrants, percentage of net revenue, annual usage rights payment), the sum of which did not have a fixed value. The stalking horse agreement included a $200 million bid protection, which the debtors argued was reasonable based on the complex transaction, similar transaction fees approved in prior Delaware cases, being required by AST, and providing a material benefit to the estates. The UST objected to the bidding procedures motion and raised the following points concerning the stalking horse agreement:

No bid protection should be paid if the transaction could not be consummated for regulatory reasons because the debtors have no control on whether regulatory approval is obtained, and regulatory denial would force the debtors to begin negotiating with alternative purchaser(s) and lose $200 million.
Any alternative purchaser the debtors select as the successful bidder must result in not merely any transaction, but one that is a higher and better bid than AST’s.
It would be improper to include a second-protection fee of an additional $250 million if the debtors’ $40 billion takings lawsuit against the U.S. related to the debtors’ wireless terrestrial 5G services adversely affected AST’s use of the debtors’ L-band spectrum (i.e., a range of radio frequencies used for satellite navigation, maritime and aviation safety, and radars).
Similar to the objection in Jo-Ann Stores, the stalking horse should not be granted super-priority expense status because only sections 364(c)(1) and 507(b) authorize such a classification.
The large $200 million bid protection should be market tested.

The debtors and UST subsequently resolved the UST’s objection by agreeing: (a) that the bid protection would be payable after a failure to receive regulatory approval only if the debtors subsequently consummated a higher or better transaction; (b) only the expense reimbursements would receive super-priority administrative expense status and all other bid protections would merely be treated as an administrative expense (although the postpetition DIP lenders voluntarily agreed to subordinate their obligations to the remaining bid protections); and (c) the request to authorize payment of the $250 million second-protection fee related to any potential impact to the L-band spectrum would be removed. The bankruptcy court entered an order approving the revised bidding procedures.
First Mode[3]
On December 15, 2024, the First Mode debtors filed chapter 11 bankruptcy petitions, and the following day filed their bidding procedures motion. The bidding procedures motion included a stalking horse asset purchase agreement with Cummins, Inc., which proposed to grant Cummins bid protections in the form of a 3% break-up fee and expense reimbursements of up to $550,000. The UST objected to the bid protections on the following grounds:

Similar to the objections in Jo-Ann Stores and Ligado Networks, the bid protections should not prime other administrative expenses as super-priority expenses because only sections 364(c)(1) and 507(b) authorize the classification of an expense as a super-priority administrative expense status.
Certain payment triggering scenarios, such as withdrawing the bidding procedures motion or filing a motion to convert or dismiss the case, provided no benefit to the estates as required by section 503(b) (i.e., does not promote competitive bidding or induce the stalking horse to perform diligence and set a floor price).

The debtors and UST resolved the objections by: (a) classifying the bid protections as an administrative expense claim; (b) providing the UST, debtors, and creditors’ committee five business days to review proposed expense reimbursements before such amounts are payable; and (c) slightly narrowing the circumstances that would trigger payment of the bid protections.
Takeaways
Debtors who seek approval of a stalking horse agreement in their bidding procedures motions should be prepared for the UST to object to certain aspects of the bid protections. First, the UST will most likely object if the proposed classification for the bid protections is a super-priority administrative expense claim. Although the debtors in First Mode conceded to the UST’s position, debtors could attempt to bifurcate the classification by authorizing superpriority status for expense reimbursements (Ligado Networks) or push forward with pursuing full superpriority status, which was successfully obtained in Jo-Ann Stores.
Second, debtors should be cognizant of potential objections to the triggering events for paying bid protections. It is unlikely that a debtor would be permitted to pay bid protections in the event the debtor, without demand by its secured creditor(s), files a motion to convert or dismiss its bankruptcy cases. Further, if there are significant contingencies surrounding the future value of the business (e.g., Ligado Networks’ $40 billion takings lawsuit affecting the L-band spectrum), parties may want to consider reflecting that risk in a reduced sale price or increased bid protection amount rather than as a triggering event for payment of additional protection amounts. And if the contingency is related to obtaining governmental consents before the sale can be consummated (e.g., Ligado Networks’ regulatory approval), such contingency should not likely be a triggering event unless it is succeeded by the consummation of an alternative transaction.
Third, in liquidation situations like Jo-Ann Stores where the stalking horse would incur significant expenses to wind-up the debtors’ businesses and liquidate assets, bankruptcy courts may be more lenient to grant bid protections when such expenses clearly are incurred to benefit the estates.
In conclusion, proactive negotiation with the UST concerning bid protection terms is a prudent first step for counsel of both debtors and the stalking horse bidder to pursue in order to resolve the issues the UST has recently identified in the Jo-Ann Stores, Ligado Networks, and First Mode bankruptcy cases.

[1] In re Jo Ann, Inc., Case No. 25-10068 (CTG) (Bankr. D. Del. Jan. 15, 2025).
[2] In re Ligado Networks LLC, Case No. 25-10006 (TMH) (Bankr. D. Del. Jan. 5, 2025).
[3] First Mode Holdings, Inc., Case No. 24-12794 (KBO) (Dec. 15, 2024).

Court Applies Internal Affairs Doctrine Even Though Statute Refers Only To Directors

Courts are wont to say that Section 2116 of the California Corporations Code codifies the internal affairs doctrine. See Villari v. Mozilo, 208 Cal. App. 4th 1470, 1478 n.8 (Cal. Ct. App. 2012)(“Corporations Code section 2116 codifies [the internal affairs doctrine] in California.”). I have long held the position that this is only partially true. Section 2116 provides:
The directors of a foreign corporation transacting intrastate business are liable to the corporation, its shareholders, creditors, receiver, liquidator or trustee in bankruptcy for the making of unauthorized dividends, purchase of shares or distribution of assets or false certificates, reports or public notices or other violation of official duty according to any applicable laws of the state or place of incorporation or organization, whether committed or done in this state or elsewhere. Such liability may be enforced in the courts of this state. (emphasis added)

The statute makes no reference to officers. Thus, it would seem reasonable to conclude that it does not apply to officers. Courts, however, seem to miss the obvious omission of officers from the statute, as illustrated in a recent ruling by U.S. District Court Judge Janis L. Sammartino in Lapchak v. Paradigm Biopharmaceuticals (USA), Inc., 2025 WL 437904 (S.D. Cal. Feb. 7, 2025). In that case, Judge Sammartino ruled that Delaware law applied to the individual defendant even though the plaintiff failed to allege that the defendant was a director of the corporation. In fact, neither party even alleged that the corporation was incorporated in Delaware, but the court did some online checking. Finally, it is unclear from the ruling whether the individual defendant was even an officer of the corporation.
As I have previously contended, officers are agents of the corporation whilst directors qua directors are not. In many cases, their duties and responsibilities may be governed by contractual choice of law provisions and local agency and employment laws. In any event, a plain reading of Section 2116 reveals that officers have no place in it.

Weekly Bankruptcy Alert March 10, 2025 (For the Week Ending March 9, 2025)

Chapter 11

Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate

Mass Power Solutions LLC(Marlborough, MA)
Building Equipment Contractors
Worcester(MA)
$0to$50,000
$1,000,001to$10 Million
3/5/25

Lake Spofford Cabins, Inc.(Spofford, NH)
RV Parks and Recreational Camps
Concord(MA)
$1,000,001to$10 Million
$100,001to$500,000
3/3/25

New Leda Lanes, Inc,(Nashua, NH)
Not Disclosed
Concord(MA)
$100,001to$500,000
$1,000,001to$10 Million
3/3/25

Levy Ventures LLC(New City, NY)
Activities Related to Real Estate
White Plains(NY)
$10,000,001to$50 Million
$10,000,001to$50 Million
3/5/25

JC TopCo, Inc.2(Kansas City, MO)
Management of Companies and Enterprises
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
3/8/25

Imerys Talc Italy S.P.A.(Turin, Italy)
Nonmetallic Mineral Mining and Quarrying
Wilmington(DE)
$10,000,001to$50 Million
$1,000,001to$10 Million
3/9/25

YJ Simco LLC(New York, NY)
Not Disclosed
Manhattan(NY)
$1,000,001to$10 Million
$1,000,001to$10 Million
3/9/25

Chapter 7

Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate

Guzman Trading, Inc(Randolph, MA)
Not Disclosed
Boston(MA)
$0to$50,000
$100,001to$500,000
3/4/25

Allied Resin Technologies, LLC(Leominster, MA)
Not Disclosed
Worcester(MA)
$100,001to$500,000
$1,000,001to$10 Million
3/6/25

1Business Type information is taken from Bankruptcy Court filings, which may include incorrect categorization by the debtor or others.
2Additional affiliate filings include: JC Parent Corporation, JC Intermediate Holdings, Inc., Jack Cooper Investments, Inc., Jack Cooper Equipment Leasing, LLC, Jack Cooper Holdings, LLC, Jack Cooper Rail & Intermodal, LLC, Jack Cooper Diversified II, LLC, Jack Cooper Transport Company, LLC, Auto Handling, LLC, North American Auto Transportation, LLC, Jack Cooper Retail and Shuttle, LLC, Auto & Boat Relocation Services Company, LLC, Jack Cooper CT Services, LLC and Jack Cooper Logistics II, LLC.

Connecticut Establishes Emergency Certificate of Need Process for Hospitals in Bankruptcy

On March 3, 2025, Connecticut Governor Ned Lamont signed a law establishing a new process for hospitals in bankruptcy to apply for an “emergency certificate of need” (CON) to approve a transfer of ownership. The law, titled “An Act Concerning An Emergency Certificate Of Need Application Process For Transfers Of Ownership Of Hospitals That Have Filed For Bankruptcy Protection, The Assessment Of Motor Vehicles For Property Taxation, A Property Tax Exemption For Veterans Who Are Permanently And Totally Disabled And Funding Of The Special Education Excess Cost Grant” (the “Act”), was passed by the Connecticut Legislature though its emergency certification process in order to expedite its approval, presumably to allow the law and new process to be available for CON review of the potential sale(s) of Prospect Medical hospitals in Connecticut expected this year.
Emergency CON Process
Under the Act, the emergency CON process is to be available when “(1) the hospital subject to the transfer of ownership has filed for bankruptcy protection in any court of competent jurisdiction, and (2) a potential purchaser for such hospital has been or is required to be approved by a bankruptcy court.”
The Act requires the Office of Health Strategy (OHS) to:

Develop an emergency CON application for parties to utilize, and in doing so OHS must “identify any data necessary to analyze the effects of a hospital’s transfer of ownership on health care costs, quality and access in the affected market.”

Notably, if the buyer is a for-profit entity, OHS is permitted to require additional information to ensure that the continuing operation of the hospital is in the public interest.

Make a “completeness” determination on a submitted application within 3 business days.

Once an emergency CON application is deemed complete, OHS may – but is not required to – hold a public hearing within 30 days thereafter, and if a hearing is held OHS must notify the applicant(s) at least 5 days in advance of the hearing date. The Act provides that a public hearing or other proceeding related to review of an emergency CON is not a “contested case” under the state’s Uniform Administrative Procedure Act, which limits the procedural and appeal rights of the applicant(s). The Act also allows OHS to contract with third-party consultants to analyze the effects of the transfer on cost, access, and quality in the community, with the cost borne by the applicant(s) and not to exceed $200,000.
Emergency CON Decisions and Conditions
The Act requires final decisions on emergency CONs to be issued within 60 days of the application being deemed complete. Importantly, OHS is required to “consider the effect of the hospital’s bankruptcy on the patients and communities served by the hospital and the applicant’s plans to restore financial viability” when issuing the final decision. The Act also permits OHS to “impose any condition on an approval of an emergency” CON, as long as OHS includes its rationale (legal and factual) for imposing the condition and the specific CON criterion that the condition relates to, and that such condition is reasonably tailored in time and scope. The Act also expressly provides that any condition imposed by OHS on the approval of an emergency CON will apply to the applicant(s), including any hospital subject to the transfer of ownership “and any subsidiary or group practice that would otherwise require” a CON under state law that is part of the bankruptcy sale. However, the Act does allow the applicant(s) to request a modification of conditions for good cause, including due to changed circumstances or hardship.
Finally, the Act provides that the final decision on an emergency CON, including any conditions imposed by OHS as part of the decision, is not subject to appeal.
Takeaways
The Act seeks to establish a clear expedited pathway for CON review of hospital (and health system) sales as part of the bankruptcy process. The specific process, including the form of application, is likely to be rolled out quickly by OHS to be available as part of the resolution of the Prospect Medical bankruptcy process anticipated to occur during 2025. The ultimate efficacy of the process will depend upon the specific data sought as part of the emergency CON process, and on the scope of any conditions imposed by OHS on the sales (which could introduce uncertainty into the bankruptcy sale and approval process), but the establishment of this avenue for review is likely to be welcomed by parties to hospital system bankruptcy actions.

Weekly Bankruptcy Alert March 3, 2025 (For the Week Ending March 2, 2025)

Chapter 11

Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate

1 Dalfanso LLC(Newburgh, NY)
Not Disclosed
Poughkeepsie(NY)
$1,000,001to$10 Million
$1,000,001to$10 Million
2/24/25

Dynamic Aerostructures LLC(Valencia, CA)
Aerospace Product and Parts Manufacturing
Wilmington(DE)
$10,000,001to$50 Million
$50,000,001to$100 Million
2/25/25

Dynamic Aerostructures Intermediate LLC(Valencia, CA)
Aerospace Product and Parts Manufacturing
Wilmington(DE)
$10,000,001to$50 Million
$50,000,001to$100 Million
2/25/25

Forrest Machining LLC(Valencia, CA)
Aerospace Product and Parts Manufacturing
Wilmington(DE)
$10,000,001to$50 Million
$50,000,001to$100 Million
2/25/25

Eureka Realty Corp.(New York, NY)
Residential Building Construction
Manhattan(NY)
$1,000,001to$10 Million
$1,000,000to$10 Million
2/25/25

Quinebaug Camp Properties, Inc.(Woonsocket, RI)
Not Disclosed
Providence(RI)
$100,001to$500,000
$500,001to$1 Million
2/28/25

MOM CA Investco LLC(Newport Beach, CA)
Activities Related to Real Estate
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
2/28/25

MOM AS Investco LLC(Newport Beach, CA)
Activities Related to Real Estate
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
2/28/25

MOM BS Investco LLC(Newport Beach, CA
Activities Related to Real Estate
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
2/28/25

Azzur Group Holdings LLC2(Hatboro, PA)
Management, Scientific, and Technical Consulting Services
Wilmington(DE)
$100,000,001to$500 Million
$100,000,001to$500 Million
3/2/25

Eureka Realty Corp.(New York, NY)
Residential Building Construction
Manhattan(NY)
$1,000,001to$10 Million
$1,000,001to$10 Million
2/25/25

Chapter 7

Debtor Name
BusinessType1
BankruptcyCourt
Assets
Liabilities
FilingDate

Genera Health Direct LLC(Needham, MA)
Not Disclosed
Boston(MA)
$0to$50,000
$500,000to$1 Million
2/24/25

AM Project 145 NWS LLC(Boston, MA)
Activities Related to Real Estate
Boston(MA)
$10,000,001to$50 Million
$1,000,001to$10 Million
2/25/25

AM Project 169 NWS LLC(Boston, MA)
Activities Related to Real Estate
Boston(MA)
$10,000,001to$50 Million
$1,000,001to$10 Million
2/25/25

MSI Global Talent Solutions LLC(Hampton, NH)
Not Disclosed
Concord(NH)
$100,000to$500,000
$1,000,001to$10 Million
2/25/25

At Home, Inc.(Dover-Foxcroft, ME)
Retail Trade
Bangor(ME)
$100,001to$500,000
$1,000,001to$10 Million
2/28/25

1Business Type information is taken from Bankruptcy Court filings, which may include incorrect categorization by the debtor or others.
2Additional affiliate filings include: Azzur Group, LLC, Cobalt LLC, Azzur Consulting LLC, Azzur Austin LLC, Azzur Chicago LLC, Azzur Denver LLC, Azzur IT LLC, Azzur North Carolina, LLC, Azzur of CA, LLC, Azzur of NE, LLC Azzur Princeton LLC, Azzur San Diego LLC, Azzur San Francisco LLC, Azzur Solutions LLC, Azzur Technical Services – Boston LLC, Azzur Training Center – Raleigh LLC, Azzur Washington DC LLC, Azzur Worcester LLC, Azzur Cleanrooms-On-Demand – Services LL, Azzur Cleanrooms-On-Demand – Boston LLC, Azzur Cleanrooms-On-Demand -Burlington LLC, Azzur Cleanrooms-On-Demand – Devens LLC, Azzur Cleanrooms-On-Demand – Raleigh LLC, Azzur Cleanrooms-On-Demand San Diego LLC, Azzur Cleanrooms-On-Demand San Francisco LLC, Azzur Labs, LLC, Azzur Labs – Boston LLC, Azzur Labs – Chicago LLC, Azzur Labs – Dallas LLC, Azzur Labs – San Diego LLC, Azzur Labs – San Francisco LLC and Azzur Labs NC, LLC.

(UK) Is 5p Enough to Cram Down HMRC in a Restructuring Plan?

For those in the mid-market who have watched developments in restructuring plans (RP) move from a potential rescue tool, to something prohibitively expensive, the OutsideClinic RP might be one to watch. Not least because the RP seeks to cram down HMRC.
Following RPs proposed by Naysmyth and the Great Annual Savings Company (which were unsuccessful in cramming down HMRC) the appetite to use an RP in the mid-market does seem to have quietened down, despite HMRC subsequently issuing guidance for insolvency practitioners intended to help companies that wish to restructure using an RP.
There is little reported about the OutsideClinic’s RP at the moment, save that as part of the plan it seeks to treat unsecured creditors and HMRC as secondary preferential creditor, in the same way, by paying both classes of creditor 5p in the £.
HMRC’s objections to previous plans have largely stemmed from the fact that the RPs have not recognised its preferential status in how the restructuring surplus (created by the RP) has been shared.
The relevant alternative to OutsideClinic’s RP is stated to be administration, and, somewhat unusually, the estimate suggests that HMRC would receive nothing in an administration. That might differentiate this RP from other “typical” mid-market plans. However, if press reports are correct, HMRC has indicated that it intends to challenge the plan including how it is treated under the plan given its preferential status.
If HMRC do challenge the RP, the development of HMRC’s argument about its treatment as preferential creditor under the plan will be one to watch, because this will likely inform how mid-market RPs could develop in the future.
That said, if HMRC’s position is that it will challenge all RPs to reflect its position as an involuntary creditor, the costs of having to deal with that challenge on every RP are likely to price out RPs for the majority of the mid-market. Perhaps the real one to watch, will be an RP that receives HMRC support even where it includes some write down of amounts owed to HMRC!

Troubled Assets: Key Considerations

In the current cycle, asset quality remains strong at most institutions. There are occasional exceptions — a poorly managed business, a hurricane or other unexpected event, etc. — but for the most part, banks and other lenders have strong portfolios.
This, of course, will not last forever. Interest rates have risen in the last few years. Certain sectors, including office and retail, have faced headwinds as technology has fueled a rise in remote work and remote shopping.
It is prudent to plan for the next downturn. The following are some key considerations in dealing with troubled assets.
1. AN ENFORCEABLE WORKOUT IS A GOOD SOLUTION
As in most areas of the law, a settlement is better than litigation. If it is possible to structure a forbearance agreement to allow the borrower to come back into compliance with the loan obligations, that often is the best solution.
It is best to build in some protections for the lender, if possible under the circumstances. A forbearance agreement without some “teeth” often results in simply kicking the can down the road — delaying the default rather than remedying the situation.
If possible, the borrower should concede, in the forbearance agreement, the necessary elements the lender otherwise would have to prove in a court case to enforce its loan documents. In exchange for the lender’s forbearance, the borrower should concede that the loan is in default, the specific payments missed or other violations, the amount due, and that the borrower has no defense to payment. The borrower should concede that if it fails to abide by the terms of the forbearance agreement, the lender is entitled to a judgment against it in court in a specified amount. The borrower should concede that if it files for bankruptcy protection, it will, within the bounds of applicable bankruptcy law, cooperate with the lender’s efforts to lift any bankruptcy stay to pursue collateral.
2. DO YOU WANT THE COLLATERAL?
Another key consideration is the quality of the collateral. Real estate or other collateral for which there is a ready market at a good price of course is best, but not all loans have such collateral. Some real estate and other collateral can be difficult to manage and dispose.
The lender is not required to pursue the collateral, absent unusual provisions rarely contained in standard loan documents. A serious consideration whether to pursue the collateral, and what the lender intends to do with it if it forecloses, should be made at the outset.
Many loan documents provide for the appointment of a receiver as one of the lender’s remedies. A receiver is an officer appointed by a court to manage property until the lender is able to foreclose on it or the borrower is able to settle. For certain properties — office, retail, and multifamily in particular — a receiver can be a good option in some circumstances. The receiver takes control of the property, books, and records; pays the bills and operates the property; and in some circumstances is able to market it and bring potential buyers to the court for approval. A receiver can be a good option when a lender needs to have collateral managed and marketed appropriately without having to take title itself. The lender should bear in mind that while the receiver has control of the property, the lender will likely incur expenses. The receiver’s fee will have to be paid, as will the property’s operating expenses. To the extent that the property does not generate sufficient income to do this, the shortfall often must be covered by the lender until the property is sold. While any such advances usually can be added to the loan balance, they may not ultimately be recoverable.
3. IF YOU GET A MONETARY JUDGMENT, WHAT THEN?
The usual remedy to recover on a defaulted loan, of course, is to sue the borrower for the amount owed. Most such cases are straightforward. Assuming the lender can prove that it owns the loan, that the loan is in default, and what amount is due, the cases usually result in a judgment for the lender. While, in some circumstances, there can be lender liability issues to consider, most often the resolution is in the lender’s favor.
This, however, is only the beginning. A judgment is simply a piece of paper stating that the borrower owes a certain sum to the lender. It does not guarantee collection.
A survey of the borrower’s assets, beyond any pledged collateral, is an important first step. Does the borrower own real estate in its own name? A lender’s monetary judgment can become a lien on that property. Are there other liens that would be senior in time to the lender’s judgment? Is there enough remaining equity to make a levy upon the real estate worth it? The same analysis would apply with respect to personal property.
OTHER CONSIDERATIONS
Be ready for bankruptcy. Good bankruptcy counsel can guide a lender to the best resolution if a debtor files a bankruptcy petition.
Remember that there can be a market for your loan documents and for your monetary judgments. Private equity funds exist that will purchase your paper. An important protection to build into any sale of your paper is that the purchaser indemnifies and holds the lender harmless from any lender liability claims.

Update of German Law Aspects of Crypto Assets

Our recently updated article considers how EU and German civil and regulatory law approach crypto assets with a particular focus on how those types of crypto assets are dealt with in an insolvency.
In this article we explore the different types of crypto assets there are, the legal nature of them, how crypto assets are dealt with in insolvency proceedings and the recovery of such assets.

(UK) Office-Holder Remuneration Applications – The Importance of Details

When it comes to applications by office-holders for approval of their remuneration, the message in the case of Poxon and another v Wejo Ltd (in administration) [2025] EWHC 135 (Ch) was, the detail matters.
Background
Having failed to obtain approval from the creditors in respect of both their pre and post administration costs, the joint administrators of Wejo invited the court to fix the basis of their post-administration remuneration and expenses by reference to time properly spent by them and their staff in attending to the administration of the company pursuant to r. 18.23 of the IR 2016 and approve their unpaid pre-administration costs as an expense of the administration pursuant to r. 3.52(5) of the IR 2016 (the Application).
Certain creditors of Wejo intervened to oppose the Application on the grounds that the joint administrators’ evidence in support was insufficient to enable to court to properly consider the Application.
However, the joint administrators sought to argue that r. 18.23 was concerned with fixing the “basis” of remuneration only, and the court need not be concerned to scrutinise the fees estimate delivered to creditors pursuant to r. 18.16(4)(a) (the Fees Estimate) – if the creditors had concerns regarding the amount of remuneration sought, their remedy was under r. 18.34.
Accordingly, the issues raised by the case where:

the extent to which, if at all, the court should scrutinise the quantum of the Fees Estimate, when it is asked to determine the basis of remuneration on an application brought pursuant to r. 18.23; and
the level of detail required more generally on applications bought pursuant to r. 3.52 and r. 18.26.

Outcome
Unfortunately for the joint administrators of Wejo, the judge was not prepared to fix the basis for remuneration (or to approve pre-administration fees) because the information provided by the administrators about the work done did not enable him to form a sensible view on the reasonableness of the fees, especially as the Fees Estimate now represented work already carried out.
One might be forgiven for thinking that when seeking to fix the basis of remuneration, there is a distinction between that, and the level of remuneration, given the wording in r.18.23 provides for the court to “fix the basis”, not the amount. But the two are linked.
The insolvency practice direction, which the judge turned to in this case, sets out guiding principles for remuneration applications – the objective being to ensure the amount and/or basis of the remuneration to be fixed by the court is fair.
The basis upon which the fees were to be drawn could not therefore be determined without scrutiny of the Fee Estimate. The judge wanted to see more information to support the time spent by reference to the work done.
The judge also disagreed with the joint administrators’ submission that a creditor’s ability to challenge the amount of remuneration pursuant to r. 18.34, extended to remuneration fixed by the court under r. 18.23.
As such, the Application was adjourned to allow the administrators to provide further information.
Key take-aways for Office-Holders
It is clear from Wejo that where the court is being asked to fix the basis of remuneration by reference to time properly spent that:

The onus is on the office holder to justify their fees.
The court will need to understand why the work has been undertaken and be satisfied that it is both reasonable and commensurate with the fees incurred.
In doing this the court will scrutinise the remuneration that an office-holder is seeking to recover by reference to their fees estimate and will require an office holder to follow the guiding principles in the practice direction. In particular the requirements of paragraph 21 of the Practice Direction: Insolvency Proceedings [2020] BCC 698.

The costs of preparing such an application can often be quite steep, due to the level of information that the court requires, and as this case demonstrates, expects.
Although office holders have 18 months from the date of their appointment, to make an application to fix the basis of their remuneration, there might be something to be said for making an application to court to fix the basis of remuneration early – the more work that has been done, the more information the court will require.