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  • bnwild56 bnwild56 Jun 20, 2013 5:14 PM Flag

    Will court toss 2 lien overboard?

    ""Similarly, the Fifth Circuit reversed"" If the court does I see a reveral coming.
    ""applicable Fifth Circuit precedent, transactions that propose to eliminate successor liability or
    grant broad releases are not permissible outside of a chapter 11 plan. Id. at 422 (“[t]ransactions
    that explicitly release all (or virtually all) claims against the estate . . . are not authorized under
    § 363(b)”), 428 (holding that transaction proposing a release, assignment of certain contracts and
    elimination of successor liability must be accomplished under section 1129). The Court stated
    that the proper procedure for carrying out such a transaction was through the full chapter 11
    process, including the disclosure, voting and other requirements of section 1129. Id. at 414.
    Similarly, the Fifth Circuit reversed the Bankruptcy Court’s approval of the proposed sale under
    section 363(b) of the Bankruptcy Code in Braniff because such sale, among other things, dictated
    the terms of any future plan for the debtor.
    22. The bankruptcy court in In re Fremont Battery Co. rejected a proposed
    sale of the debtor’s assets when the sale did not “benefit other creditors or that would provide
    funds from which a reorganization plan could be proposed.” 73 B.R. at 279. After finding that
    the proposed sale “would terminate the Debtor’s existence,” the bankruptcy court refused to
    approve the proposed sale because it essentially dictated the terms of a plan of reorganization
    through the sale of a major asset. Id. at 279. The circumstances in Fremont resonate loudly with
    the facts of this case.
    23. Here, the proposed sale is also, in effect, a sub rosa plan that should not be
    approved by this Court. As in Gulf Coast, Braniff and Fremont, the Credit Bid strips the estate
    of any optionality. The proposed transaction dictates the exact treatment of the DIP Lenders’
    claims, provides for the assumption of certain contracts and not others, and assures that no other
    creditors will receive any recovery. In additio

 
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