Jamaica Business – Reggae Shack http://reggae-shack.com/ Mon, 18 Apr 2022 11:28:45 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://reggae-shack.com/wp-content/uploads/2021/10/profile-120x120.png Jamaica Business – Reggae Shack http://reggae-shack.com/ 32 32 Delaware Bankruptcy Court Rules that Unsecured Creditors of a Solvent Debtor Are Entitled to Post-Petition Interest at the Federal Judgment Rate, Not the Default Interest Rate | Cadwalader, Wickersham & Taft LLP https://reggae-shack.com/delaware-bankruptcy-court-rules-that-unsecured-creditors-of-a-solvent-debtor-are-entitled-to-post-petition-interest-at-the-federal-judgment-rate-not-the-default-interest-rate-cadwalader-wickersham/ Sat, 15 Jan 2022 03:28:08 +0000 https://reggae-shack.com/?p=655 On December 22, 2021, Judge Mary Walrath of the Bankruptcy Court for the District of Delaware held in In re The Hertz Corp. that redemption premiums may potentially qualify as unmatured interest, and that, to the extent that such redemption premiums are unmatured interest on unsecured debt, then creditors would only be entitled to receive […]]]>


On December 22, 2021, Judge Mary Walrath of the Bankruptcy Court for the District of Delaware held in In re The Hertz Corp. that redemption premiums may potentially qualify as unmatured interest, and that, to the extent that such redemption premiums are unmatured interest on unsecured debt, then creditors would only be entitled to receive the federal judgment rate, not the contractual rate of interest.  The decision departs from a recent decision from the Texas bankruptcy court in the Ultra Petroleum case, which held that unimpaired unsecured creditors of a solvent debtor would be entitled to receive the contractual rate of interest.

Factual Background

In the wake of the COVID-19 pandemic, the Hertz Corporation and its affiliates (the “Debtors”) filed voluntary petitions under chapter 11 of the Bankruptcy Code. During the course of Virginia bankruptcy laws case, Hertz’s liquidity position improved and thus, under Hertz’s plan of reorganization, all creditors were being paid in full.  However, the plan provided that unsecured creditors would receive post-petition interest accruing at the federal judgment rate or at any rate necessary to render creditors unimpaired.   The federal judgment rate was lower than the default interest provided in the indentures.  The plan also provided that prepetition equity holders would receive distributions of cash and equity.

In July 2021, Wells Fargo Bank, N.A., as indenture trustee for the Debtors’ unsecured senior noteholders, filed an adversary complaint against the Debtors seeking to recover (1) a make-whole premium due under the senior notes (totaling approximately $147 million) and (2) post-petition interest on their claims at the contract default rate in excess of the federal judgment rate (approximately $125 million).  The Debtors moved to dismiss the complaint.

Discussion

In a comprehensive opinion, the Court granted in part and denied in part the Debtors’ motion to dismiss.  Of significance, the Court held that only some of the senior noteholders were entitled to receive a redemption premium under the indentures, that the redemption premiums may potentially qualify as the economic equivalent of unmatured interest (and thus could be subject to disallowance), and that unsecured creditors of a solvent debtor are only entitled to receive post-petition interest at the federal judgment rate.

I.          Entitlement to Redemption Premiums

Indentures and credit agreements may require a borrower to pay a prepayment or redemption premium to “protect the lenders’ right to a yield that was expected at the time that they made their loans.” A redemption premium thus refers to the repayment of a debt at or before its maturity date at a certain percentage above its face value, which in certain circumstances may compensate the lender or noteholder for lost interest as a result of the early redemption of the debt.

The Court first addressed whether the senior noteholders were entitled to redemption premiums.  The Debtors moved to dismiss the complaint on the grounds that the redemption premiums were not payable under the express language of the indentures because the acceleration provisions (which were triggered automatically upon the Debtors’ filing) in the indentures did not provide for the payment of redemption premiums. However, the Court rejected the Debtors’ arguments that the indentures did not provide for the payment of a redemption premium upon automatic acceleration by virtue of the bankruptcy filing.  Relying on the Third Circuit’s decision in Energy Future Holdings, the Court held that the applicable contractual provision for determining the noteholders’ entitlement to redemption premiums was the specific redemption provision, not the automatic acceleration provision.

Therefore, turning to the express language of the redemption provisions, the Court determined that some—but not all—of the noteholders were entitled to receive a redemption premium.  Specifically, the Court held that holders of certain senior notes (the “2022/2024 Notes”) were not entitled to a redemption premium because the applicable redemption provisions only provided for redemption “prior to maturity thereof at the applicable redemption price set forth below.”  Given that the redemption provision referred to an undefined term for maturity of the debt, the Court held that no redemption premium was due on the 2022/2024 Notes because the notes matured as a result of the bankruptcy filing.  In other words, because the bankruptcy filing and not the stated maturity date triggered maturity under the terms of the indenture, no such right to any redemption premium existed post-petition.

By contrast, the Court held that holders of other senior notes (the “2026/2028 Notes”) were entitled to a redemption premium under the express language of their indenture, which differed from that of the 2022/2024 Notes.  The redemption provisions for the 2026/2028 Notes provided that “[a]t any time prior to [a specified date], the [senior notes] may also be redeemed (by the Company or any other person) in whole or in part, at the Company’s option, at . . . the Redemption Price . . . .” The Court read this provision to “simply [provide] the Debtors with the ability to redeem under the circumstances” specified in that provision, and notably did not contain the requirement that redemption must occur before maturity.  Because the bonds were redeemed prior to the dates specified in the redemption provision, the Court found that, unlike the 2022/2024 noteholders, the 2026/2028 noteholders stated a plausible claim for relief as to the 2026/2028 noteholders’ entitlement to a redemption premium.

II.         Is the Redemption Premium the Equivalent of Unmatured Interest?

The Court next addressed the Debtors’ contention that the redemption premium should be disallowed as unmatured interest under section 502(b)(2) of the Bankruptcy Code.  Section 502(b)(2) of the Bankruptcy Code provides that a claim is disallowed “to the extent that . . . such claim is for unmatured interest.”  Notably, “unmatured interest” is not defined in the Bankruptcy Code, but rather has been interpreted by courts to include post-petition interest and contractual charges that are the “contractual equivalent” of future interest.

The Court noted that while the Third Circuit in Energy Future Holdings did characterize a redemption premium as the “contractual substitute for interest lost on Notes redeemed before their expected due date,” it was not addressing the issue in the context of section 502(b)(2) disallowance.  Further, the Court discussed the decision in Ultra Petroleum, where the Fifth Circuit noted that a make-whole premium could be considered unmatured interest and remanded to the bankruptcy court to determine the issue.  On remand, the Bankruptcy Court for the Southern District of Texas concluded that the make-whole premium was not the economic equivalent of unmatured interest and not disallowed under Section 502(b)(2). This decision is currently on appeal.

When deciding whether a contractual charge is unmatured interest, “courts look to the economic substance of the transaction to determine what counts as interest.”  In Hertz, the Court concluded that to determine whether the redemption premium is the economic equivalent of unmatured interest is not a legal question, but a factual one. Put another way, simply characterizing the makewhole claim as liquidated damages, breach of contract damages, or another separate contract right could avoid the effect of section 502(b)(2) in the hands of an astute drafter.  In practice, a contract could provide that upon default or redemption, “all unmatured interest” would be immediately due and payable, therefore avoiding Bankruptcy Code section 502(b)(2) disallowance in contravention of the Bankruptcy Code.

In considering the redemption premium provision here, the Court found it significant that the premium is calculated on the present value of unmatured interest due as of the redemption date, but left the door open for the noteholders to introduce evidence to the contrary.  The Court thus denied the Debtors’ motion to dismiss the noteholders’ claim that it must pay a redemption premium on the 2026/2028 Notes.

III.        Unsecured Creditors of a Solvent Debtor May Only Receive Interest at the Federal Judgment Rate

Finally, the Court addressed which interest rate would apply to the redemption premium. Section 1124 of the Bankruptcy Code provides that a claim is unimpaired if, among other things, the plan “leaves unaltered the legal, equitable, and contractual rights” of the holder of that claim.  However, section 502(b)(2) provides for the disallowance of any unmatured interest.  Whether a claim is impaired has significant implications: creditors that are impaired generally are entitled to certain rights in the context of plan confirmation, including (i) the right to vote to accept or reject the plan and (ii) the right to receive consideration equal to what the creditor would have received in a hypothetical chapter 7 liquidation.

The noteholders contended that because the plan designated senior noteholders as unimpaired for purposes of section 1124 of the Bankruptcy Code (which provides that a class of claims or interests is impaired under a plan unless the plan leaves such class’s legal, equitable, and contractual rights to such claims or interests unaltered), the noteholders should be entitled to receive interest at the contract rate.  On the other hand, the Debtors argued that because it was section 502(b)(2) of the Bankruptcy Code that disallowed unmatured interest, rather than the Debtors’ plan, the senior noteholders’ claim was unimpaired under Third Circuit precedent.  The Court ruled in favor of the Debtors, holding that unsecured creditors “are not impaired within the meaning of section 1124(1)” because the senior noteholders’ claim to unmatured interest or the redemption premium was modified by section 502(b)(2) of the Bankruptcy Code, and not the Debtors’ plan.

Nevertheless, the noteholders argued that they were entitled to their contract rate of interest because “the Debtors are awash in cash, paid all creditors in full, and provided a substantial return on investment to equity.”  The Court acknowledged that prior to the enactment of the Bankruptcy Code, courts applied a “solvent debtor” exception.  This exception provided that the contractual rights of unimpaired creditors must be preserved in bankruptcy when a debtor is solvent. The Court found, however, that “the solvent debtor exception survived the passage of the Bankruptcy Code only to a limited extent.”  Indeed, the Court noted that Congress expressly codified the solvent debtor exception in two sections of the Bankruptcy Code:  section 506(b) (which provides for payment of post-petition interest to oversecured creditors) and section 726(a)(5) as to impaired unsecured creditors.

However, the Bankruptcy Code “is silent on what treatment unimpaired creditors must receive in a solvent chapter 11 debtor case.”  The Court found that nothing in the express text of the Bankruptcy Code or in its legislative history required the payment of post-petition interest at the contract rate of interest.  Thus, the Court held that even if the solvent debtor exception survived the enactment of the Bankruptcy Code, the Bankruptcy Code did not specify what interest rate would be required to establish that an unsecured creditor is unimpaired.  The Court noted that Congress could have provided a solvent debtor exception for unimpaired unsecured claims by (i) excepting unmatured interest from disallowance under section 502(b) when the debtor is solvent or (ii) by amending section 1124 to provide that unimpaired creditors must receive their contract rate of interest, in addition to payment in full of their allowed claim.  But Congress created neither exception.

Due to the lack of guidance from the text of the Bankruptcy Code, courts have remained split on the applicable “legal rate” of interest for unimpaired unsecured creditors in a solvent chapter 11 debtor case.  Some courts have held that unsecured creditors are entitled to receive post-petition interest at the “contract rate,” meaning the interest rate specified in the prepetition contract (or if there is no contract, the interest rate specified under state law).  However, other courts have held that creditors of a solvent debtor are only entitled to receive interest at the federal judgment rate, which is typically lower than the contract rate.

The Court concluded that the federal judgment rate was the appropriate applicable rate of interest in Hertz.  In support of its conclusion, the Court noted that neither the Bankruptcy Code nor its legislative history indicated any intent for unimpaired unsecured creditors of a solvent debtor to receive better treatment than impaired unsecured creditors.  The Court thus found no basis to distinguish between unimpaired and impaired unsecured creditors in a solvent debtor case.  Pursuant to sections 1129(a)(7) and 726(a)(5) of the Bankruptcy Code, impaired unsecured creditors in a solvent debtor chapter 11 case are entitled to receive post-petition interest at the federal judgment rate.  Specifically, section 726(a)(5) requires payment of interest at the “legal rate” before any distributions to equity holders can be made, and section 1129(a)(7) provides that with respect to each impaired class of claims or interests, creditors are entitled to receive what they would have received in a liquidating chapter 7 case.

The Court noted that adopting a uniform rule to apply to all unsecured creditors regardless of whether they are impaired provides more certainty and fairness in bankruptcy cases.  The Court stated that providing that “all general unsecured creditors are entitled to the same post-petition interest in a solvent chapter 11 debtor case prevents a debtor from paying preferred creditors more than others simply by classifying them as unimpaired.”  While the noteholders complained that designation of their claims as unimpaired deprived them of the right to vote on the plan, the Court found that the noteholders’ impairment would not have resulted in different treatment.  Specifically, the Court stated that if the noteholders “had been treated as impaired and if they had voted against the Plan, they would have received the same treatment: payment in full in cash of their allowed claim plus post-petition interest in accordance with sections 1129(a)(7) and 726(a)(5).”  In other words, the noteholders would have still received interest at the federal judgment rate.

The Court thus rejected the noteholders’ reliance on the Texas bankruptcy court’s decision in Ultra Petroleum.  In that case, the Texas bankruptcy court held that the Bankruptcy Code did not abolish the solvent debtor exception and that the solvent debtor exception would require payment of default interest provided in the contracts.  The Ultra Petroleum court’s decision hinged on its determination that unimpaired creditors were entitled to have their equitable rights fully enforced under section 1124(1) in a “solvent debtor” case.  Judge Walrath did not find this reasoning persuasive because “[a] bankruptcy court cannot use equitable principles to modify express language of the Code,” such as section 502(b)(2), which “expressly disallows claims of unsecured creditors for unmatured interest.”  The Debtor’s solvency, according to the Court, does not “waive the application of section 502(b)(2).”  Therefore, the Court concluded that the noteholders failed to state a plausible claim that the Debtors must pay post-petition interest on the senior notes at the contract rate rather than at the federal judgment rate and dismissed this count in the noteholders’ complaint.

Conclusion

Judge Walrath’s decision in Hertz confirms that under Third Circuit precedent, it is the applicable redemption provision—not the acceleration provision—that is determinative as to a creditor’s entitlement to receive a redemption premium in bankruptcy.  Where, as with the 2026/2028 noteholders in Hertz, the entitlement to receive a premium is not dependent on a redemption occurring prior to a maturity date, then creditors may be entitled under their contracts to receive the redemption premium in bankruptcy.  By contrast, as with the 2022/2024 noteholders, if the redemption premium is dependent on the redemption occurring prior to the maturity date and the indenture provides for automatic acceleration upon a bankruptcy filing, then a court could conclude, as the Court did here, that the creditors are not entitled to the redemption premium under the express language of the governing agreements.

Judge Walrath’s decision also underscores the split among courts as to the proper treatment of unimpaired unsecured creditors in a solvent chapter 11 case.  Consistent with a recent decision in the PG&E case in California, Judge Walrath held that both impaired and unimpaired unsecured creditors in a solvent chapter 11 debtor case are entitled to receive the federal judgment rate, not the contractual rate of interest.  The Hertz decision thus conflicts with the Ultra Petroleum decision in Texas, which held that unimpaired unsecured creditors of a solvent debtor are required to receive their contractual default rate of interest.

Unimpaired unsecured creditors of a solvent debtor should therefore be mindful that this is an evolving issue in bankruptcy that remains unsettled and can vary among courts and districts.  Even where a debtor is solvent and has sufficient liquidity to pay post-petition interest, a court may conclude that an unsecured creditor of a solvent debtor may only be entitled to post-petition interest at the federal judgment rate, which likely is substantially lower than the default rate of interest.

1   Wells Fargo Bank, N.A. v. The Hertz Corp. (In re The Hertz Corp.), Adv. No. 20-11218 (MFW), 2021 WL 6068390, at *3 (Bankr. D. Del. Dec. 22, 2021).

2   Id. at *2.

3   Id.

4   Id. at *3.

5   See In re Chemtura Corp., 439 B.R. 561, 596 (Bankr. S.D.N.Y. 2010).

6   See In re MPM Silicones LLC, 874 F.3d 787, 802 (2d Cir. 2017).

7   In re The Hertz Corp.,  2021 WL 6068390, at *3  (citing In re Energy Future Holdings Corp., 842 F.3d 247 (3d Cir. 2016)).

8   Id. at *5.

9   Id. at  **5-6.

10  Id. at *7.

11  Id. at n.11.

12 In re Energy Future Holdings Corp., 842 F.3d at 251; see also In re MPM Silicones, 874 F.3d, 787, 802 (2d Cir. 2017) (noting that a make-whole premium “was intended to ensure that the Senior-Lien Note holders received additional compensation to make up for the interest they would not receive if the Notes were redeemed prior to the maturity date.”).

13 In re Energy Future Holdings Corp., 842 F.3d at 251, 253 n.1.

14 In re Ultra Petroleum Corp., 943 F.3d 758, 765 (5th Cir. 2019).

15 In re Ultra Petroleum Corp., 624 B.R. 178, 188-95 (Bankr. S.D. Tex. 2020).

16 In re Doctors Hosp. of Hyde Park, Inc., 508 B.R. 697, 705 (Bankr. N.D. Ill. 2014).

17 In re The Hertz Corp., 2021 WL 6068390, at *8.

18 Id.

19 11 U.S.C. § 1124(1).

20 Id. § 502(b)(2).

21 See 11 U.S.C. §§ 1129(a)(7), 1126.

22 In re PPI Enters. (US), Inc., 324 F.3d 197, 204 (3d Cir. 2003) (holding that a creditor is unimpaired if it is the effect of the Bankruptcy Code that modifies its rights, not the debtor’s plan).

23 In re The Hertz Corp.,  2021 WL 6068390, at *11.

24 Id.

25 Id. at *16.

26 Id.

27 Id. at *11.

28 See, e.g., In re Dow Corning Corp., 456 F.3d 668 (6th Cir. 2006) (“When a debtor is solvent, then, the presumption is that a bankruptcy court’s role is merely to enforce the contractual rights of the parties, and the role that equitable principles play in the allocation of competing interest is significantly reduced.”).

29 See, e.g., In re Cuker Interactive, 622 B.R. 67, 71 (Bankr. S.D. Cal. 2020) (“[A]ssuming the Creditors are unsecured, they must receive postpetition interest at the Federal Judgment Rate to be unimpaired by the Plan.”); In re PG&E, 610 B.R. 308, 312-313 (Bankr. N.D. Cal. 2019) (holding that unimpaired unsecured creditors are only entitled to receive post-petition interest at the federal judgment rate).

30 In re The Hertz Corp.,  2021 WL 6068390, at **11-13.

31 Id. at *14 (distinguishing Dow Corning, 456 F.3d at 678-80 because its ruling was premised on section 1129(b), which considers the rights of impaired creditors, not unimpaired creditors, in a solvent chapter 11 debtor case).

32 See 11 U.S.C. § 726(a)(5) (providing payment of post-petition interest at “the legal rate” to creditors, before any distribution to the debtor (or equity), in the event there are funds left after paying all other claims in a chapter 7 liquidation case); id. § 1129(a)(7) (providing that with respect to each impaired class of claims or interests, each holder of such claim has either accepted the plan or will receive at least what it would have received in a liquidating chapter 7 case).

33 In re The Hertz Corp.,  2021 WL 6068390, at *17.

34 Id. at *16.

35 See In re Ultra Petroleum Corp., 624 B.R. 178, 196 (Bankr. S.D. Tex. 2020).

36 In re The Hertz Corp., 2021 WL 6068390, at *15.

37 Id.

38 In re PG&E Corp., 610 B.R. 308 (Bank. N.D. Cal. 2019).

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Judge dismisses legal shield in bankruptcy of former parent of Ann Taylor https://reggae-shack.com/judge-dismisses-legal-shield-in-bankruptcy-of-former-parent-of-ann-taylor/ Sat, 15 Jan 2022 00:07:00 +0000 https://reggae-shack.com/judge-dismisses-legal-shield-in-bankruptcy-of-former-parent-of-ann-taylor/ An Ann Taylor “LOFT” store in Encinitas, California. REUTERS/Mike Blake Join now for FREE unlimited access to Reuters.com Register Summary Law firms Related documents Company must return to bankruptcy court to set out plan Judge calls executive protections ‘shocking’ The names of companies and law firms listed above are auto-generated based on the text of […]]]>


An Ann Taylor “LOFT” store in Encinitas, California. REUTERS/Mike Blake

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  • Company must return to bankruptcy court to set out plan
  • Judge calls executive protections ‘shocking’

The names of companies and law firms listed above are auto-generated based on the text of the article. We are improving this feature as we continue to test and develop in beta. We appreciate feedback, which you can provide using the feedback tab on the right side of the page.

(Reuters) – A federal judge in Virginia has terminated legal protections for insiders at Ann Taylor’s former parent company, calling the company’s use of a popular tool in bankruptcies “shocking”. businesses.

In an 87 page decision, U.S. District Judge David Novak of the Eastern District of Virginia on Thursday overturned a Virginia bankruptcy laws court’s approval of Mahwah Bergen Retail Group’s Chapter 11 reorganization plan and ruled that the so-called non-debtor releases were void and unenforceable. The company had said the releases, which protect non-bankrupt people and company-related entities, were key to the plan.

“The sheer scale of the releases can only be described as shocking,” Novak wrote.

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Novak found that the bankruptcy court that approved the deal exceeded “the constitutional limits of its authority,” mirroring similar concerns raised by a judge who ruled on releases of non-debtors in the manufacturer’s bankruptcy. from OxyContin Purdue Pharma.

Mahwah, formerly known as Ascena Retail Group, filed for bankruptcy in July 2020 with over $1 billion in debt and plans to close several of its stores. The company’s brands, including Ann Taylor, Lane Bryant and Loft, were later sold to private equity firm Sycamore Partners. Mahwah now only exists to reduce its domain.

Last year, U.S. Bankruptcy Judge Kevin Huennekens approved the company’s plan, which included releasing non-debtors for company insiders from litigation that accused Ascena and former executives of fraud. in securities. Lead plaintiffs in the securities dispute and the US Department of Justice’s bankruptcy watchdog, the US Trustee, have appealed.

Novak said in Thursday’s ruling that releases of non-debtors have become too frequent. He said the 4th US Circuit Court of Appeals had ‘clarified’ that such releases were ‘disadvantaged’ and should be granted ‘cautiously and infrequently’.

He also referenced the recent reversal by a Manhattan federal judge of the approval of Purdue Pharma’s bankruptcy plan based on similar concerns about non-debtor releases, which in Purdue’s case were intended to protect the Sackler family owners of the company. Novak said Mahwah’s assertion that posts are essential to his reorganization is undermined by the fact that they have become so mainstream.

“As District Judge Colleen McMahon aptly observed, ‘Where every case is unique, none are unique,'” Novak wrote.

A lawyer for Mahwah did not immediately respond to a request for comment.

A spokesperson said the US administrator is “extremely pleased with the court’s opinion and will continue to defend his legal position in other districts across the country.”

The case is Joel Patterson et al v Mahwah Bergen Retail Group, Inc., US District Court, Eastern District of Virginia, No. 3:21-cv-00167.

For Mahwah: George Hicks Jr., Andrew Lawrence, Edward Sassower, Steven Serajeddini and John Luze of Kirkland & Ellis and Cullen Speckhart and Olya Antle of Cooley

For the US Administrator: Ramona Elliott, P. Matthew Sutko and Sumi Sakata of the DOJ and John Fitzgerald III, Kathryn Montgomery and Hugh Bernstein of the Office of the US Administrator

For Securities Applicants: Mickey Etkin, Andrew Behlmann and John Schneider of Lowenstein Sandler and Ronald Page Jr. of Ronald Page PLC

Read more:

Purdue Pharma decision targets controversial U.S. bankruptcy tactic

Bankruptcy judge approves sale of Ann Taylor and Lane Bryant to Sycamore

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Our standards: The Thomson Reuters Trust Principles.

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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Without help, India faces bankruptcy, new survey finds https://reggae-shack.com/without-help-india-faces-bankruptcy-new-survey-finds/ Fri, 14 Jan 2022 21:55:43 +0000 https://reggae-shack.com/without-help-india-faces-bankruptcy-new-survey-finds/ Photo: Shutterstock Greg Leon, owner of a small Spanish-Portuguese restaurant in Milwaukee, said he was barely keeping his head above water, especially with the latest COVID surge. He’s trimmed his menu, cut his wine list and, most importantly, cut his days of operation to just three to keep Amilinda afloat with his limited staff. “We […]]]>


Photo: Shutterstock

Greg Leon, owner of a small Spanish-Portuguese restaurant in Milwaukee, said he was barely keeping his head above water, especially with the latest COVID surge.

He’s trimmed his menu, cut his wine list and, most importantly, cut his days of operation to just three to keep Amilinda afloat with his limited staff.

“We are a malfunctioning piece of equipment because we have no money in our accounts,” Leon said.

Thousands of independent restaurant owners are currently working in positions similar to Leon’s, many of them on the verge of Virginia bankruptcy laws and sinking deeper into debt.

A survey released by the Independent Restaurant Coalition on Friday found that 42% of businesses that did not receive Restaurant Revitalization Fund (RRF) grants this year are at risk of declaring bankruptcy or have already done so. About one in five of those who received the limited RRF money said they could go bankrupt.

The $28.6 billion RRF quickly disappeared last year, providing aid to only about a third of the total applicants.

Additionally, 41% of independent restaurateurs who did not receive FRR grants said they took out new personal loans to support their business and more than 25% said they had to sell a personal asset to support their restaurant during the pandemic. .

Like Leon, those who did not receive RRF money said they were forced to cut their payroll by 30%, the survey found.

The 1,200 restaurants surveyed said the recent omicron surge had a disastrous impact on their operations, with 58% saying their sales had more than halved in the past month and 46% saying they had to cut their hours open for more than 10 days in December.

Normally, Leon could do 60 covers on a Friday night in January. With the COVID outbreak and many cancellations or no reservations at all, he had 22 tables scheduled for this Friday.

His biggest fear, right now, is what would happen if he got COVID.

“I went a few pay periods without paying myself,” he said. “We have always had a very small team. When we are open I am online to cook. If I get sick, I have to close. There is no one to cover my shifts. And that’s my biggest concern. Not necessarily catch it and get sick.

More than 90,000 restaurants and bars have closed since the pandemic began in March 2020, according to data from the National Restaurant Association.

The IRC lobbied Congress to reconstitute the RRF.

Currently, a bipartisan Senate group led by Small Business Chairman Ben Cardin (D-Maryland) is considering a bill that would provide about $40 billion in assistance to restaurants.

“Omicron’s surge has pushed many restaurants to the brink, especially those still awaiting grants from the Restaurant Revitalization Fund,” IRC Executive Director Erika Polmar said in a statement. “These businesses are filing for bankruptcy and receiving eviction notices after crying for help for nearly two years.”

The lobby group is planning a national day of action to save restaurants on Tuesday to demand that Congress reinstate the RRF.

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Aloft Miami-Brickell owner emerges from bankruptcy https://reggae-shack.com/aloft-miami-brickell-owner-emerges-from-bankruptcy/ Fri, 14 Jan 2022 21:30:00 +0000 https://reggae-shack.com/aloft-miami-brickell-owner-emerges-from-bankruptcy/ Left to right: Pedro Villar, owner of Aloft Miami Brickell, with his attorney Joe Pack (Newstar Media) The owner of Aloft Miami-Brickell emerged from Virginia bankruptcy laws after resolving a payment dispute with a New York-based lender over a $17 million loan. U.S. Bankruptcy Judge Robert Mark on Wednesday upheld a Chapter 11 reorganization plan […]]]>


Left to right: Pedro Villar, owner of Aloft Miami Brickell, with his attorney Joe Pack (Newstar Media)

The owner of Aloft Miami-Brickell emerged from Virginia bankruptcy laws after resolving a payment dispute with a New York-based lender over a $17 million loan.

U.S. Bankruptcy Judge Robert Mark on Wednesday upheld a Chapter 11 reorganization plan for Mary Brickell Village Hotel LLC, the company run by Miami developer Pedro Villar that owns the 160-key property at 1001 Southwest Second Avenue. The plan includes a settlement agreement requiring Villar’s entity to make a one-time lump sum payment of $2.5 million to a subsidiary of New York-based Torchlight Investors.

In exchange, the Torchlight subsidiary will reinstate a $17 million loan that the lender foreclosed in March last year. In a statement attached to his company’s July 2021 Chapter 11 petition, Villar alleged that Torchlight “had no sincere interest in negotiating in good faith and decided early in the process that they wanted to take the hotel.” .

Torchlight executives and the firm’s Miami attorneys, David Gay and Merrick Gross, did not respond to phone and email messages seeking comment.

Aloft Miami-Brickell’s attorney Joe Pack told The Real Deal that the hotel has remained profitable through most of the pandemic and generated cash flow to cover its debt service. However, Torchlight forced its client to file for bankruptcy protection after the lender refused to resolve its claims for default interest, special service charges and legal fees which Villar’s company disputed, it said. he declares.

In seeking Chapter 11 bankruptcy, the owner of Aloft Miami-Brickell forced Torchlight to the negotiating table, Pack said.

“This was a solvent, cash flow hotel that was using Chapter 11 as a sword against a grabbing lender,” Pack said. “All commercial real estate borrowers need to understand this is an option to protect themselves from aggressive lenders during the pandemic.”

In its foreclosure lawsuit filed in Miami-Dade Circuit Court, the Torchlight subsidiary alleged that the owner of Aloft Miami-Brickell had not made monthly payments since April 2020. The loan was taken out in 2014 .

In his statement to the bankruptcy court, Villar said Aloft Miami-Brickell suffered an initial economic hit when hotels were forced to close in the early months of the pandemic. But the loan was backed by hundreds of thousands of dollars in reserves “when Covid-19 arrived in March 2020,” Villar’s statement said.

Villar said he wanted to work out a contingency plan with Wells Fargo, which was handling the loan, in case his company misses payments. He then discovered that the Torchlight subsidiary had taken over servicing the loan and that the new lender would not help the hotel-owning entity make changes, Villar wrote.

Villar, chairman of Miami-based Sunview Companies, completed the 14-story Aloft Miami-Brickell in 2013. He bought the development site for $11.6 million in 2010, records show. The bankruptcy petition says the hotel has $34 million in assets and $18 million in liabilities.

The owner of the Holiday Inn Port of Miami-Downtown also filed for Chapter 11 bankruptcy last year due to economic hardship from the pandemic. 340 Biscayne Owner LLC’s case is still pending.

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Assessing Directors’ Protections After Del’s Bankruptcy Ruling. https://reggae-shack.com/assessing-directors-protections-after-dels-bankruptcy-ruling/ Fri, 14 Jan 2022 21:08:00 +0000 https://reggae-shack.com/assessing-directors-protections-after-dels-bankruptcy-ruling/ By Ryan Dahl, Matthew McGinnis and Benjamin Rhode (January 14, 2022, 4:08 p.m. EST) – As we look to 2022, we draw your attention to the lessons of the October 2021 decision of the United States Bankruptcy Court in the District of Delaware in Friedman v. Wellspring Capital Management LLC.[1] Wellspring is a cautionary tale […]]]>


By Ryan Dahl, Matthew McGinnis and Benjamin Rhode (January 14, 2022, 4:08 p.m. EST) – As we look to 2022, we draw your attention to the lessons of the October 2021 decision of the United States Bankruptcy Court in the District of Delaware in Friedman v. Wellspring Capital Management LLC.[1]

Wellspring is a cautionary tale for the trustees of a distressed or potentially distressed company – particularly with respect to negotiations around release or indemnification provisions for those same trustees.

In Wellspring, the Virginia bankruptcy laws court held that an alleged breach of the duty of loyalty could survive a motion to dismiss when:

The company in difficulty would have concluded an agreement in principle on an amicable restructuring; and

Apparently the…

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H2O further writes down Windhorst bonds after near bankruptcy https://reggae-shack.com/h2o-further-writes-down-windhorst-bonds-after-near-bankruptcy/ Fri, 14 Jan 2022 11:44:50 +0000 https://reggae-shack.com/h2o-further-writes-down-windhorst-bonds-after-near-bankruptcy/ H2O Asset Management suffered larger writedowns on its holdings of bonds linked to Lars Windhorst, after agreeing to help the German financier avoid Virginia bankruptcy laws. Once a star of European asset management, H2O was plunged into crisis in 2019 when the Financial Times revealed it had heavy exposure to illiquid securities linked to Windhorst, […]]]>


H2O Asset Management suffered larger writedowns on its holdings of bonds linked to Lars Windhorst, after agreeing to help the German financier avoid Virginia bankruptcy laws.

Once a star of European asset management, H2O was plunged into crisis in 2019 when the Financial Times revealed it had heavy exposure to illiquid securities linked to Windhorst, a flamboyant entrepreneur with a criminal record.

H2O’s funds allowed ordinary investors to withdraw their money daily, but the asset manager temporarily froze several of them in 2020 after the French financial regulator raised concerns about their Windhorst-related investments. H2O then split these funds, creating closed “side pockets” to house these hard-to-sell bonds and stocks, trapping over €1 billion in investor money.

These investors expected to access their money in a few weeks, but H2O has now informed them that it has reduced their investments further, after reaching an agreement which allows Windhorst to delay repayment of its debt by six months.

In a letter to investors on Wednesday, H2O revealed that the “estimated valuation” of side pockets had fallen by as much as 44% in some cases, due to “lack of repayment” since reaching a restructuring agreement with Windhorst last year.

Under that May 2021 deal, H2O said it had consolidated its disparate investments into a single bond with Windhorst’s main investment firm, Tennor Holding, with repayment due in “early 2022”. The German financier then told the FT in August that Tennor planned to “repay much of the H2O debt before the end of the year”. [2021]”.

The latest repayment delay is likely to intensify regulatory scrutiny of H2O, which still manages 16 billion euros in assets, even after substantial withdrawals from investors. In minutes published last month, H2O confirmed that it was “currently under investigation” by several regulators, including for “alleged non-compliance with a number of principles established by the FCA”. [the UK’s Financial Conduct Authority]”. The company says it is cooperating with investigations.

H2O declined to comment. Tennor told the FT he had “made substantial repayments to all of his creditors, including H2O”.

“Tennor will continue its normal course of business and expect to repay its debts in the weeks and months ahead on a timely and regular basis,” the Windhorst-based company added.

H2O’s letter to investors cited a recent Dutch court ruling, in which Windhorst’s lawyers successfully overturned an earlier judgment declaring Tennor insolvent. To undo the bankruptcy, Windhorst negotiated a six-month standstill agreement with major creditors, including H2O, according to the December 21 court ruling, which means they cannot demand repayment of their debts during this period. period.

Dominique Stucki, a lawyer representing a group of aggrieved investors who filed a lawsuit against H2O, expressed surprise at the deal.

“We believe that if the debt was secured and guaranteed as strongly as H2O claimed, I don’t understand why they should waive their rights and accept a six-month standstill,” he said.

The insolvency claim against Tennor was brought by Panamanian investment firm Corvallis Navigation, linked to billionaire heiress Athina Onassis, for an alleged debt of more than 36 million euros. The professional jumper inherited a fortune from her grandfather, Greek shipping magnate Aristotle Onassis.

A lawyer acting for the company told the FT that neither “Corvallis nor Miss Onassis wish to make any statement or comment at this stage”.

Besides Corvallis and H2O, the other major creditors that have signed the status quo are Heritage Travel and Tourism, a Bahamian investment vehicle linked to Ovidio’s billionaire Monegasque cruise magnate Manfredi Lefebvre.

Heritage won a substantial judgment against Windhorst at the High Court in London last year, which ordered the financier to pay 172 million euros to honor a series of contested investment agreements, which involved shares in companies such as lingerie manufacturer La Perla.

French bank Natixis is still the majority shareholder in H2O, although it announced its intention to sell its stake more than a year ago. Natixis announced last month that the sale was still ongoing and would make a further announcement “in due course and in accordance with regulatory process”.

Before being mired in controversy, H2O proved a lucrative investment for Natixis, often paying out hundreds of millions of euros in dividends a year.

H2O’s auditor Mazars issued a qualified opinion for its 2020 accounts, while saying there was “material uncertainty” that could cast “significant doubt” on the company’s ability to continue as a going concern. .

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Red River moves forward in bankruptcy court https://reggae-shack.com/red-river-moves-forward-in-bankruptcy-court/ Fri, 14 Jan 2022 04:52:55 +0000 https://reggae-shack.com/red-river-moves-forward-in-bankruptcy-court/ FORT WAYNE, Ind. (WANE) – Red River Waste Solutions’ bankruptcy proceedings advanced Thursday in Texas federal court. WANE 15 has obtained court documents for the hearing and they show that an emergency motion regarding Red River’s contract with Fort Wayne is “resolved”. We asked Fort Wayne City spokesman John Perlich and Red River attorneys exactly […]]]>


FORT WAYNE, Ind. (WANE) – Red River Waste Solutions’ bankruptcy proceedings advanced Thursday in Texas federal court. WANE 15 has obtained court documents for the hearing and they show that an emergency motion regarding Red River’s contract with Fort Wayne is “resolved”.

We asked Fort Wayne City spokesman John Perlich and Red River attorneys exactly what “resolved” means. Red River’s attorneys did not respond to our email at 11:30 p.m. Tuesday.

Perlich said today’s hearing was a status conference, but he didn’t elaborate on exactly what the results mean for the city’s contract with Red River.

“The City’s legal team is encouraged by the progress made and the dialogue in the bankruptcy process. There will be an update for the public/media/City Council on Tuesday evening at the next City Council meeting,” Perlich said in an emailed statement.

WANE 15 has also reached out to Republican Councilman Russ Jehl if he knows what Thursday’s court update means for the Red River contract. He said he was unaware of it until WANE showed it to him, saying the city kept the council in the dark.

Jehl will hold a press conference on Friday where he told WANE 1t he plans to call on the city to cite “at the public level.” He said he will also outline the steps he thinks the city should take now to prepare for a possible transition to another company if the Red River contract fails.

WANE 15 also showed the court documents to corporate lawyer Apexa Patel to better understand what ‘resolved’ could mean.

The hearing to ask a judge to make Red River choose whether to accept or reject its contract with Fort Wayne was originally requested by the surety, Argonaut Insurance Company. The surety is responsible for posting the surety bond provided for in the contract at the beginning of the year. There is no indication that the deposit payment has been made for 2022.

Patel said that because Thursday’s court documents said it was “resolved by the parties,” it could mean that Red River and Argonaut reached an agreement on their own. Or, because Argonaut has “passed” the hearing set by the court and there is no other pending motion, it is assumed to be “resolved”.

Either way, it’s still unclear how the development will affect Fort Wayne’s contract going forward, but Red River continues and hasn’t stopped collecting trash.

Again, Fort Wayne City prosecutors will give an update on the status of the Red River Waste Contract to City Council on Tuesday, which is open to the public. WANE 15 will also be there to ensure full coverage.

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Disinfecting wipes maker GPMI declares bankruptcy and lays off dozens of workers https://reggae-shack.com/disinfecting-wipes-maker-gpmi-declares-bankruptcy-and-lays-off-dozens-of-workers/ Thu, 13 Jan 2022 23:57:00 +0000 https://reggae-shack.com/disinfecting-wipes-maker-gpmi-declares-bankruptcy-and-lays-off-dozens-of-workers/ The onset of a global health pandemic seemed to bode well for companies in the right sector, like disinfectant wipes maker Gilbert GPMI Company, but things didn’t go as planned. After a major expansion deal with an Israeli industrial partner turned sour, the company was forced to halve its workforce. This week, the company filed […]]]>


The onset of a global health pandemic seemed to bode well for companies in the right sector, like disinfectant wipes maker Gilbert GPMI Company, but things didn’t go as planned.

After a major expansion deal with an Israeli industrial partner turned sour, the company was forced to halve its workforce.

This week, the company filed for Chapter 11 bankruptcy protection. This means the company is entering into a side deal with its secured creditors in exchange for restructuring its biggest debts. A secured creditor, like a bank, has security in the event of default.

Often, during Virginia bankruptcy laws proceeding, unsecured creditors – sub-contractors of sub-contractors and small local businesses – could end up with many empty bags.

According to bankruptcy filings in federal court, GPMI has more than 100 creditors who want to be paid. The company had between $10 and $50 million in assets or the total value of the company and between $10 and $50 million in debts to creditors or payables.

GPMI has $13.3 million in unsecured claims from 116 creditors, records show.

He generated $14 million in revenue during the bad deal of 2021 and all, according to bankruptcy records.

Yarron Bendor, an Israeli entrepreneur, founded GPMI in 1989, and is headquartered in Arizona ever since. The company manufactures wet wipes of various types for companies including US companies The Clorox Company and Procter & Gamble Company, but also the Dial brand created by German giant Henkel AG, according to court documents.

GPMI had over 100 employees. Most received pink slips.

A recent scathing Google review of the company by a former employee described a tumultuous year, in which dozens of newly hired employees were laid off and the hours were so unpredictable “that at one point people started to quit.”

The company – which did not return immediately Phoenix New Times’ inquiries for this article – said in court documents that his financial problems began with the pandemic.

Although in the spring of 2020 demand for wet wipes and other disinfectant products increased, eliminating them from drugstore and grocery store shelves, shortages of manufacturing materials made it increasingly difficult for GPMI to keep pace. .

We all remember browsing the empty shelves for them.

Additionally, cheaper and lower quality products have flooded the market, which GPMI says has contributed to lower demand in 2021.

But it was a deal with an Israeli hygiene giant, Albaad Massuot Yitzhak Limited, that ultimately landed GPMI in serious debt.

Albaad is listed on the stock exchange and claims to be one of the world’s largest manufacturers of wet wipes and other hygiene products. It does business in the United States and Europe in addition to Israel. In the spring of last year, he offered GPMI an attractive deal: he wanted to order tens of millions of products from the company, to bolster its offerings in the United States when demand peaked. Albaad promised the local company $80 million in orders in the first year and $100 million in the second year, according to GPMI.

The expansion of the company, at the time, has been touted as a win for Gilbert’s economy. GPMI spent $7.5 million to speed up operations, somewhat offset by Albaad’s $3.75 million upfront payment.

But things quickly turned sour.

GPMI built new facilities, hired dozens of new employees, and began shipping product.

Albaad’s client needed FDA approval for their product but ran into problems securing it.

Albaad never paid for or even collected the products, according to the bankruptcy filings. GPMI ended the year with revenue $37 million lower than forecast.

GPMI was forced to pay $17,000 to stock products for which it had no buyer and was $800,000 short of budgeted revenue. And the Israeli company was not ready to buy $25.5 million more of the product by the end of December 2021.

“Other promises of payment were made by Albaad but nothing materialized,” Bendor said in court filings.

It turns out that Albaad decided to tell its shareholders that it would cancel $10 million from its failed US expansion venture “due to issues with its customers and distributor and research litigation options with its partners,” GPMI said in bankruptcy court filings.

Still, GPMI painted a bright future for its sales, saying it still forecast more than $15 million in revenue for the coming year, given the new customers it had developed.

The company got a $2.5 million loan to pay its remaining employees and other expenses until it could restructure and even consider selling itself out of its mountain of debt.

He also says he plans to seek damages from Albaad in civil court, whose “failure to perform threatened the very survival of GPMI.”

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How will Evergrande’s bankruptcy affect Inter? https://reggae-shack.com/how-will-evergrandes-bankruptcy-affect-inter/ Thu, 13 Jan 2022 21:13:35 +0000 https://reggae-shack.com/how-will-evergrandes-bankruptcy-affect-inter/ What happened to Evergrande? Evergrande (previously Hengda Group) was founded in 1996 by Xu Jiayin in 1996 and located at Shenzhen, China, rapidly increased its size during China’s boom in housing by purchasing land and delivering more than 1300 market rate and luxury apartment buildings over 280 locations in China. Read more here: https://bankruptcyhq.com/state-laws/virginia-bankruptcy/​ As […]]]>

What happened to Evergrande?

Evergrande (previously Hengda Group) was founded in 1996 by Xu Jiayin in 1996 and located at Shenzhen, China, rapidly increased its size during China’s boom in housing by purchasing land and delivering more than 1300 market rate and luxury apartment buildings over 280 locations in China. Read more here: https://bankruptcyhq.com/state-laws/virginia-bankruptcy/​

As the number of homes sold started to decline in the past few times, Evergrande debt increased and the company expanded into different areas like football, electric vehicles, and even the sale of bottled water. Evergrande employs 200,000 employees directly and indirectly and is responsible for around 3.8 million jobs each year.

The impact of bankruptcy for those who own Internazionale and Suning Group

In 2021, at the end of the year the Fitch, the credit ratings agency Fitch confirmed what markets have been suggesting for some time – that Evergrande one of China’s biggest real estate developers, was unable to pay its obligations to make payments that were due on December 6.

The real estate company is currently in a dire circumstance and its potential bankruptcy could severely affect those who own Internazionale and as well as the Suning group.

For Inter the risk is real as Suning is the owner of 2.6 billion euros of Evergrande shares. In the end, Suning has significant cash flow issues as China has already suspended Evergreen’s permission to construct an enormous stadium in Guangzhou. Guangzhou.

The long-term financial challenges are thought to be the main reason Suning’s decision to not increase the amount of money it is putting into the Nerazzurri and the deportation of Antonio Conte, Achraf Hakimi and Romelu Lukaku.

As of now, Inter’s performance has not been affected since the team is fighting for the title and has been selected for their UEFA Champions League knockout stage.

They currently have a price of 67.0 according to the Champions League winner odds to win the game.

This company delayed many bond payments over the past few months and did not pay the interest due in September, has failed to make $82.5 million.

According to the ratings agency, the company is currently in default. This is not the only problem even more, it is also reported that the Bloomberg Billionaires Index, which evaluates the wealth of billionaires also shows the fact that Zhang Jindong, owner of Suning and Inter, lost $2 billion by 2021. This is half of his wealth.

The company’s total debt is believed to be in excess of $300 billion. There are a lot of concerns regarding the effects of Evergreen’s bankruptcy , not only in the property market or Chinese market but on the world market.

What’s the next step to Inter?

The Zhang family has repeatedly indicated their desire to retain control of Inter however, it is believed that increasing financial difficulties may cause them to dispose of the club. According to reports, numerous investment firms have expressed interest in buying Inter.

But, Suning is not willing to accept any lower than what it is asking that currently stands around 1 billion euros.

Furthermore, since the beginning of October, there’s speculated that the family of Saudi Arabia, in the form of the Public Investment Fund (PIF) group, is looking to purchase Inter.

The company, which changed the game of football when it purchasing Newcastle United for PS300m is interested in acquiring the storied European club.

The purchase from the team by Mohammed bin Salman would strengthen the position of the club in the Italian league, but it would also will give the club the means to compete with the best clubs in Europe and help them regain their status as a contender. for to Champions League.

At the moment, whichever the agreement that is being made, it’s essential that the club provides athletes the security they require to keep their performances up and avoid any payment issues or similar problems and also that the members feel that they are part of the club. Still, the club.

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Munster woman ordered to pay more than $80,000 in restitution to Chapter 13 trustee | USAO-NDIN https://reggae-shack.com/munster-woman-ordered-to-pay-more-than-80000-in-restitution-to-chapter-13-trustee-usao-ndin/ Thu, 13 Jan 2022 20:38:46 +0000 https://reggae-shack.com/munster-woman-ordered-to-pay-more-than-80000-in-restitution-to-chapter-13-trustee-usao-ndin/ HAMMOND—Mary Lois Cossey, 55, of Munster, Indiana, was sentenced today by United States District Court Judge Philip P. Simon following her August 2021 guilty plea to a count wire fraud charges, U.S. Attorney Clifford D. Johnson said. Cossey was sentenced to 2 years probation and was ordered to pay $81,159.97 in restitution to the Chapter […]]]>


HAMMOND—Mary Lois Cossey, 55, of Munster, Indiana, was sentenced today by United States District Court Judge Philip P. Simon following her August 2021 guilty plea to a count wire fraud charges, U.S. Attorney Clifford D. Johnson said.

Cossey was sentenced to 2 years probation and was ordered to pay $81,159.97 in restitution to the Chapter 13 trustee appointed to administer her case for the benefit of her creditors.

According to documents in that case, Cossey engaged in a scheme to defraud the Chapter 13 bankruptcy trustee and his creditors in order to take advantage of the benefits of Virginia bankruptcy laws – including the imposition of a stay of collection and debt elimination – without making the sacrifices required under Chapter 13 of the Bankruptcy Code. Cossey did not disclose in his bankruptcy petition a debt relationship with his personal friend and creditor, identified in the indictment as Person A. during his bankruptcy for personal expenses, including multiple vacations, luxury clothing and accessories, and jewelry. Cossey incurred further debt after the petition without permission from the Chapter 13 bankruptcy trustee and did not disclose changes in his employment and income during his case. Cossey repaid most of his debt to Person A, while unsecured creditors only received 27% repayment for debts that were discharged in bankruptcy.

This case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service in conjunction with the Northern Indiana Bankruptcy Fraud Working Group coordinated by Region 10 US Trustee, Nancy J. Gargula. A lawyer from the US Trustee’s South Bend office also provided assistance. This case was prosecuted by Assistant United States Attorneys Abizer Zanzi and Thomas McGrath.

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