  |
  |
  |
    
  
   |
 | |||
|
|
|
|
| |||
not pass the "pecuniary purpose" test. The stated purpose of the U.K. Proceedings is to address an alleged financial shortfall in a private pension plan, first by determining whether the Targets should provide financial support to the Trustee, and, then potentially by imposing and fixing a claim against NNI and NN CALA through a CN [which 'states that the persons to whom it is issued are under a liability to pay to the trustee of the pension plan the sum specified therein. The CN may be for all or part of the amount by which the pension plan is under-funded. This amount is treated as a debt due to the trustee of the pension plan.']. This is purely an issue of determining which, if any, entities, on an after-the-fact basis, should be financially responsible for funding a pension shortfall. It is clearly a pecuniary matter, and, notwithstanding the importance of the financial matter to the private Trustee, under the case law does not qualify as a matter of public safety or welfare." The court noted that, by filing proofs of claim in this case, the Claimants can get monetary relief in the bankruptcy court at the appropriate time. The Claimants' pecuniary interest does not warrant them standing above the rest of the creditors of the debtors. Moreover, although the Claimants ask this court to give the UK Proceedings comity, the court noted that the Claimants are themselves ignoring comity. The court also held that the Claimants failed the second test, the public policy test, because the UK Proceedings seek "to obtain financial support for the benefit of private parties- the members of the NNUK Pension Plan, represented by the Trustee- and if that fails, to assert and liquidate a claim to the property of the Debtors, on the Trustee's behalf. Any sum paid as a result of the U.K. Proceedings would not go to benefit the public, but would be used to reduce the debt owed by NNUK to the Trustee. The Trustee as intended beneficiary, and PPF, filed the proofs of claim to recover from the Debtors the same financial support that is the subject of the U.K. Proceedings." Lastly, the court discussed prejudice. The court noted that the overriding issue in all of these bankruptcy cases is the global allocation of billions of dollars of proceeds from the sale of the debtors' assets. The allocation will then determine what amount is available for distribution to which creditors. Notably, the court felt that the fact that the various parties had entered into the IFSA was relevant to the issue before it in this matter. Under the IFSA, the parties have extensively negotiated and agreed to an allocation protocol the purpose of which "is to ensure a fair allocation, to be determined (absent a consensual agreement) in a single cross-jurisdictional forum." Here, the UK Proceedings were operating outside the IFSA and the issues heavily overlapped with the issues that were negotiated for purposes of the IFSA. The UK Proceedings should not be decided by an administrative body in a single jurisdiction with a single constituency. For all these reasons, the court extended the automatic stay to preclude the continuation of the UK Proceedings.
Facts: Aretex LLC ("Aretex") and its affiliates, WestPoint International, Inc. and Westpoint Home, Inc. (together, the "Aretex Group") and Wilmington Trust Co. ("Wilmington Trust"), the administrative agent for Aretex, appeal from the orders entered on November 16, 2005 and October 9, 2007 in the District Court for the S.D.N.Y., which reversed the bankruptcy court orders allowing (1) distribution of unregistered securities and subscription rights to satisfy liens held by senior secured creditors and (2) distribution of the remaining subscription rights to junior secured creditors. Objecting senior secured creditors, Contrarian Funds, LLC and a number of its affiliates (together, the "Contrarians") and Beal Bank, S.S.B. ("Beal Bank"), the administrative agent for the Contrarians also appeal from the District Court orders to the extent they affirmed the bankruptcy court's order releasing adequate protection payments to junior secured creditors. The facts underlying these cases are complicated and extensively summarized in the court's opinion; in a nutshell, the facts are these. In June 2003, WestPoint Stevens, Inc. (the "Debtor") filed for chapter 11. The Debtor's creditors include, inter alia, the First Lien Lenders (senior secured lenders with liens in the amount of $488 million) and the Second Lien Lenders (junior secured lenders with liens in the amount of $165 million). The Contrarians hold a majority share about 54% of the liens that belong to the First Lien Lenders, but none of the liens held by the Second Lien Lenders. The First Lien Lenders and the Second Lien Lenders had, pre-petition, entered into an Intercreditor and Lien Subordination Agreement (the "Intercreditor Agreement"), which provided two exceptions allowing adequate protection payments, and permitting mandatory prepayments to the agreement that the Second Lien Lenders could not exercise their
©2010 Leif M. Clark
