Senior reporter James Holloway and distressed debt legal analyst Kevin Eckhardt discuss the overview of cram-ups for companies including Garrett Motion. The podcast explores recent chapter 11 cases where senior secured lenders may be controlled by junior note holders through a process called Cram up. It highlights ongoing conflicts between senior lenders and alternative plan sponsors, as well as disputes between debtors and Wells Fargo in the CBL case.
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Quick takeaways
Cram downs in chapter 11 bankruptcies have become a recent trend, allowing junior noteholders to gain control while rendering senior creditors unimpaired.
Tensions have arisen between senior lenders and RSA parties in the CBL and Associates bankruptcy case, potentially leading to a cram-down proposal.
Deep dives
Plaintiffs in Malinkrott bankruptcy seek relief from automatic stay
Plaintiffs involved in class action antitrust suits related to Aqthar Gel before the Malinkrott bankruptcy are seeking relief from the automatic stay. The plaintiffs argue that Malinkrott PLC and Malinkrott ARD LLC are actively engaged in ongoing violations of federal and state antitrust laws and consumer fraud laws. They claim that their claims exceed $10 billion and represent the largest group of unsecured creditors who have not signed the RSA. Relief from the automatic stay would allow them to pursue changes to Aqthar business practices and seek damages against defendant companies.
Overview of cram downs in Garrett Motion bankruptcy
The podcast discusses the recent trend of cram downs in senior secured lenders in chapter 11 bankruptcies. Garrett Motion, Malinkrott, and CBL and Associates are presented as examples. In Garrett Motion's case, senior lenders are currently on board with the debtor's proposed plan, which would pay them the principal and interest at the non-default contract rate. However, alternative plan sponsors have offered a revised alternative plan construct that could entice senior lenders to switch sides. The episode explains that cram downs involve rendering senior creditors unimpaired while junior noteholders control the case.
Dispute between senior lenders and CBL and Associates
Tensions are rising between senior lenders and RSA parties in the CBL and Associates bankruptcy case. The debtors entered into an RSA with noteholders that would give them the majority of reorganized equity. However, senior term lenders, represented by Wells Fargo, rejected the consensus deal proposed by the debtors and noteholders. This led to Wells Fargo attempting to take control of some properties and collect rent directly from tenants, prompting the debtors to sue Wells Fargo. A temporary restraining order has been granted, and litigation over the issue is expected. The episode foreshadows the possibility of a cram-down proposal in this case as well.
The Americas Core Credit team takes a look back at the past week and previews what’s to come in the week ahead, and features an overview of cram-ups for companies including Garrett Motion with Senior Reporter James Holloway and Distressed Debt Legal Analyst Kevin Eckhardt.
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