Rocket confirmations gain ground – Lexology

In the early evening of February 23, 2021, Belk Inc. and its affiliates (collectively, “Belk”) filed their Chapter 11 bankruptcy claims with the South Texas District Bankruptcy Court. Less than seventeen hours later, Judge Marvin Isgur confirmed the reorganization plan prepared by Belk. Belk is not the first Chapter 11 bankruptcy case to accomplish plan confirmation within twenty-four hours of filing a petition, and it certainly won’t be the last. In 2019, Sungard Availability Services Capital, Inc. and its affiliates filed their Chapter 11 petitions and also confirmed their plan the next day. Likewise, FullBeauty Brands Inc., a retailer like Belk, also got confirmation of its plan less than 24 hours after filing its Chapter 11 petition earlier in 2019.

These rocket confirmations give debtors and other interested parties undisputed advantages: they ensure the efficient administration of a bankruptcy case with substantial savings. The short stay in bankruptcy minimizes administrative expenses, including fees and expenses of attorneys and other professionals for various constituents, including debtors, secured creditors and an unsecured creditors committee, among others. A quick detour through bankruptcy also limits any disruption to the debtor’s operations that might otherwise harm the business. But the expedited administration of a bankruptcy case does not mean that such a result was obtained quickly or easily. On the contrary, a lot of time and effort is spent before filing in fierce negotiations among many constituents, planning and preparation. At Belk, debtors spent months before filing their Chapter 11 petition negotiating complex debt for a share swap and finalizing restructuring support agreements. The support of the creditors contributed to the success of Belk and to the accelerated confirmation of his plan. Notably, the debtors shared the proposed “day one” pleadings, circulated the proposed plan and disclosure statements, and solicited votes on the plan. By the date of the petition, Belk had obtained unanimous consent to the plan and was able to secure confirmation of a plan that left unsecured creditors, including owners, intact.

“It’s a rare Chapter 11… where everyone wins,” Belk’s attorney said during the plan’s confirmation hearing. Nonetheless, the Belk court issued a due process preservation order and extended the deadline for opt-out discharges – an issue of growing concern in bankruptcy courts in all jurisdictions where the rights of individual creditors intersect with due process. A once thorny issue of due process, notification and consent that interrupted earlier plan confirmations was quickly resolved by the Belk court.

In Belk, debtors, interested parties, their respective attorneys and the court have paved a record path for plan confirmations where the work begins and ends primarily before the petition. In doing so, despite the unprecedented effects of the COVID-19 pandemic on the retail industry, Belk was able to keep all of its 291 stores open and 17,000 employees employed. While the circumstances and the results achieved at Belk may be rare, where restructuring goals can be successfully negotiated and votes obtained before the pre-petition, rocket confirmations are an attractive option for potential debtors.

About Marc Womack

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