Company Background and Business Operations

Prior to the sale of its assets, the company was a leading provider of natural gas compression services to upstream and midstream customers in major U.S. natural gas producing basins, with a primary focus on the Permian Basin. The company operated a network of seven facilities across Texas, New Mexico, and North Dakota, providing gas lift and gathering compression services across seven states and offshore regions in the Gulf of Mexico. Through this network, the company deployed approximately 940 compression units generating a total of approximately 326,070 horsepower. Its corporate headquarters were located at 1221 McKinney, Suite 3175, Houston, Texas 77010.

The organizational structure as of the petition date consisted of twelve entities. Seven are debtors in the chapter 11 cases. The five remaining entities are non-debtor affiliates, each of which is a non-operating entity with no assets or liabilities. E3 Compression Holdings LLC served as the immediate parent company and ultimate controlling entity. Axip Energy Services, LP was the principal operating entity and borrower under all prepetition credit agreements. Axip Leasing Company, LLC owned substantially all of the company's compression units. Energy Spectrum acquired the company in 2022.

Events Leading to Bankruptcy

Following the company's acquisition by its private equity sponsor in 2022, the business began executing on its strategy by renewing focus on contracting idle compression units, filling gaps in the market for large, high-horsepower compression units and electric compression units, and optimizing operations. When several challenging circumstances with large customer accounts coalesced in 2024, the impact was felt across the business, ultimately contributing to events of default under, and the debtors' inability to secure refinancing for, the Prepetition ABL Facility, a credit facility upon which the debtors depended for liquidity.

As the company's primary credit facility approached its maturity date of September 23, 2025, an investment banker was engaged in March 2025 to assist with refinancing efforts. In connection with the refinancing process, approximately 85 parties were contacted, approximately 51 of which entered into confidentiality agreements and received initial diligence materials. More than a dozen provided indications of interest, with nine proceeding to a second round of due diligence. The process, initially intended to close in July 2025, extended into early September 2025 without an actionable transaction, and the debtors were unable to identify any party willing to transact at sufficient levels.

With the refinancing process unsuccessful, the company engaged restructuring counsel and a financial advisor. In August 2025, the private equity sponsor provided additional equity to fund interim obligations. On September 23, 2025, the company and the Prepetition ABL Lenders entered into the Forbearance Agreement, while also entering into the Prepetition Superpriority Credit Agreement, which provided for a first-lien secured term loan credit facility of up to $15,653,000 to provide liquidity for the sales process. A second forbearance agreement was entered on November 25, 2025, and a third on December 17, 2025.

The chapter 11 cases were commenced in February 2026. On February 24, 2026, the Bankruptcy Court granted first-day relief.

Capital Structure as of the Petition Date

As of the petition date, the debtors carried approximately $240.68 million in total funded debt, consisting of:

The Postpetition Sales Process and Asset Sale

On March 5, 2026, the Bankruptcy Court entered the Bidding Procedures Order, approving the continuation of the sales process and designating Service Compression, LLC as the stalking horse bidder. The prepetition sales process had involved providing diligence materials to approximately 21 parties and fielding more than 125 questions from prospective bidders through a virtual data room and on calls. No other qualified bid was received by the bid deadline.

On April 1, 2026, with no competing qualified bids, the stalking horse bidder was designated as the winning bidder. The Bankruptcy Court entered the Sale Order on April 7, 2026 (Docket No. 270), and the asset sale closed on April 15, 2026. Upon closing, all DIP claims were repaid in full from the net sale proceeds, along with certain prepetition ABL claims. The post-sale estates retained approximately $8.6 million in cash proceeds for distributions under the plan and to fund the wind-down process.

The Bankruptcy Court approved the debtor-in-possession financing facility on a final basis on March 18, 2026 (Docket No. 178). The DIP facility consisted of $25,514,587 in new money commitments, combined with a roll-up of the full principal amount of the Prepetition Superpriority Loans (including accrued and unpaid interest) and $66,852,865.34 of Prepetition ABL Loans outstanding under the Prepetition ABL Facility.

Independent Investigation

In January 2026, the independent member of the executive committee of E3 Compression Holdings LLC retained outside counsel to conduct an independent investigation covering the four-year period prior to the petition date. The investigation involved review of over 1,000 documents and five interviews with key personnel and stakeholders. The scope encompassed a review of transfer activity, related party transactions, and the conduct of executive committee members and officers. The investigation examined potential claims including actual fraudulent transfer, constructive fraudulent transfer, preferential transfers, breach of fiduciary duty, and recharacterization.

Based on the totality of the circumstances, the independent member concluded that the debtors do not have any colorable claims or causes of action worth pursuing. This conclusion supported the proposed debtor releases incorporated into the liquidation plan.

The Proposed Liquidation Plan

The Combined Disclosure Statement and Plan provides for the wind-down of the debtors' estates following the completed asset sale. On and after the effective date, a plan administrator will manage the post-sale estates, resolve disputed claims, make distributions to allowed claims, file appropriate tax returns, and oversee the dissolution of each debtor entity. A wind-down budget agreed to with the Prepetition ABL Agent will govern the plan administrator's expenditures.

All executory contracts and unexpired leases not previously assumed and assigned to the purchaser or retained pursuant to a schedule in the plan supplement will be deemed rejected as of the effective date. Remaining estate assets other than non-vesting assets will vest in the post-sale estates for wind-down purposes. Avoidance actions against non-insiders will be automatically and irrevocably waived and abandoned as of the effective date.

The plan administrator will be appointed to act in a fiduciary capacity for the post-sale estates. The Official Committee of Unsecured Creditors will dissolve upon the occurrence of the effective date. The Bankruptcy Court will retain jurisdiction for claim resolution, plan implementation, tax determinations, and related purposes.

Global Settlement

On May 6, 2026 — the same day as the plan filing — the debtors, the Official Committee of Unsecured Creditors, the DIP Agent, the Prepetition Superpriority Agent, and the Prepetition ABL Agent entered into a Global Settlement Term Sheet. The terms of the settlement are incorporated into the plan and include, among other things, the treatment of general unsecured claims and the committee's agreement to support the plan.

Pursuant to the Global Settlement, holders of allowed general unsecured claims will receive their pro rata share of the GUC Recovery — cash in an amount equal to the lesser of $500,000 and 50 percent of the aggregate quantum of all allowed general unsecured claims (excluding claims assumed by the purchaser and deficiency claims). The private equity sponsor's general unsecured claim, if allowed, is subject to a 75 percent reduction for purposes of calculating its pro rata share of the GUC Recovery.

Treatment of Claims and Estimated Recoveries

The plan classifies claims and interests into nine classes. Holders of Prepetition ABL Claims received approximately $102.08 million in cash upon the closing of the 363 Asset Sale on account of Prepetition ABL Claims converted into DIP Claims and remaining Prepetition ABL Claims. After accounting for these sale proceeds and the distributions contemplated by the plan, the estimated aggregate recovery for holders of Prepetition ABL Claims is 49 percent. Holders of Prepetition 2L Claims received the 2L Payments during the chapter 11 cases pursuant to the settlement under the DIP Orders, totaling $950,000 in three installments, for an estimated recovery of 4.87 percent. The estimated recovery under the plan for holders of allowed General Unsecured Claims on account of the GUC Recovery is 40 percent against an estimated pool of approximately $1.2 million.

The debtors maintain that the plan satisfies the best interests test under section 1129(a)(7) of the Bankruptcy Code, as the anticipated recoveries under the plan are equal to or greater than what creditors would receive in a hypothetical chapter 7 liquidation. A liquidation analysis is expected to be appended as Exhibit A, though as of the filing date that exhibit was noted as forthcoming.

Releases and Exculpation

The plan contains debtor releases pursuant to section 1123(b) of the Bankruptcy Code, supported by the independent investigation's conclusion that no colorable claims or causes of action are worth pursuing against any potential released party. Third-party releases are also incorporated, with an opt-out mechanism available to non-voting classes. Both the debtor releases and third-party releases carve out claims related to acts or omissions determined in a final order to constitute actual fraud, willful misconduct, or gross negligence.

The plan also provides exculpation for the debtors, the independent member, the Official Committee of Unsecured Creditors, and the members of the committee (and any other statutory committee appointed in the cases) for acts or omissions occurring between the petition date and the effective date in connection with the chapter 11 cases and related matters. A gatekeeper provision requires Bankruptcy Court approval before any claim may be pursued against an exculpated party.

U.S. Federal Tax Considerations

The plan includes a discussion of certain U.S. federal income tax consequences for U.S. holders of allowed Prepetition ABL Claims. Holders are expected to recognize gain or loss on a taxable exchange equal to the difference between the distributable cash received and their adjusted basis in their claim, with specific rules applicable to accrued interest and market discount. Backup withholding and information reporting may apply to plan distributions. All holders are encouraged to consult their own independent tax advisors.

Key Dates and Timeline

Court and Case Information

The Combined Disclosure Statement and Chapter 11 Plan of Liquidation was filed on May 6, 2026, as Docket No. 338 in the jointly administered chapter 11 cases captioned In re: Axip Energy Services, LP, et al., Case No. 26-90338 (CML), pending in the United States Bankruptcy Court for the Southern District of Texas, Houston Division.

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Artha states that it transferred 3,500 ETH to Reliz in late 2025 under a Master Loan Agreement that required 120% collateralization. According to the motion, the debtors failed to post any collateral and solicited those assets while insolvent and without disclosing their financial distress or ongoing restructuring efforts. Artha incorporates by reference a supporting declaration and its prior objection to the Fourth Interim Cash Collateral Order (Dkt. No. 242), which set forth the underlying facts.

Parallel Litigation

The motion references two lawsuits filed by other counterparties as evidence of a broader pattern of alleged misconduct. Dominion Capital LLC filed suit in the Southern District of New York on February 27, 2026 (No. 1:26-cv-1672), alleging that BlockFills accepted cryptocurrency subject to contractual segregation obligations but commingled those assets and used them to fund operational expenses, trading losses, and third-party obligations. Dominion further alleges that BlockFills' board discovered this misconduct no later than August 2025 but concealed it, continued to solicit customer activity, and ultimately suspended withdrawals. Dominion's complaint asserts claims for fraudulent concealment, conversion, breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and violations of the Illinois Consumer Fraud Act.

A second action, filed in the Northern District of Illinois on March 5, 2026 by 1548199 Alberta Ltd. and an individual co-plaintiff (No. 26-cv-02451), asserts materially similar claims including fraudulent inducement and concealment, breach of contract, unjust enrichment, fraud, aiding and abetting fraud, negligent misrepresentation, conversion, constructive trust, and consumer protection violations.

CRO and CFO Testimony

At an April 16, 2026 hearing, BRG's Chief Restructuring Officer—retained in late August 2025—testified that within approximately one month of his engagement he determined the company "needed to do something to enhance its liquidity." When asked directly whether BlockFills was insolvent as of August 2025, the CRO stated that the company "had a liquidity issue" and that a determination of insolvency would require "a more extensive analysis." He declined to opine on whether liabilities exceeded assets, citing the absence of audited financial statements. The CRO also testified that he had "not done an analysis to conclude on the timing" of insolvency, and that he did not perform certain analyses typically expected of a restructuring advisor, such as determining when equity capital was depleted or tracing the use of funds. He further acknowledged that the company's financial statements were unaudited and that audits had been delayed.

At the Section 341 meeting of creditors on April 22, 2026, BRG's Chief Financial Officer was asked to identify when the debtors became insolvent. Despite approximately seven months of responsibility for the debtors' financial operations, the CFO did not provide an answer, characterizing the question as a "legal question."

The debtors have represented in their disclosure statement that the company faced an approximately $77 million balance sheet deficit.

Committee Discovery Dispute

The motion cites the Official Committee of Unsecured Creditors' Rule 2004 motion (D.I. 243) as further support, noting that informal discovery efforts have failed because the debtors have not produced a substantial body of documents. According to the committee's motion, access to records has been limited by the debtors' assertion of privileges, requiring the committee to seek broad third-party discovery from directors, officers, employees, lenders, and affiliates to reconstruct basic facts about asset disposition and financial condition.

Legal Basis for Relief

For the examiner appointment, Artha relies on 11 U.S.C. § 1104(c), which requires a court to appoint an examiner upon request where fixed, liquidated, unsecured debts exceed $5 million. Artha argues the debtors' unsecured debt—which it characterizes as tens of millions of dollars—satisfies that threshold, making appointment mandatory under the Third Circuit's decision in In re FTX Trading Ltd., 91 F.4th 148 (3d Cir. 2024), which held that the statute's use of "shall" leaves no room for judicial discretion once the threshold is met.

For the trustee appointment, Artha invokes 11 U.S.C. § 1104(a) and the Third Circuit's decision in In re Sharon Steel Corp., 871 F.2d 1217 (3d Cir. 1989), arguing that alleged fraud, commingling, misrepresentation of financial condition, and structural conflicts of interest constitute "cause." The motion identifies a structural conflict involving an individual it alleges solicited Artha's ETH and is connected to entities aligned with the debtors' largest unsecured creditor group, which Artha contends creates the same type of conflict the Sharon Steel court identified as warranting trustee appointment.

Artha also argues that the cost of appointing a trustee and examiner does not outweigh the ongoing harm to the estate, contending that the existing debtor-in-possession structure has not produced transparency or accountability, and that professional fees continue to accrue while core questions about insolvency and asset handling remain unresolved.

Schedule

Objections to the motion are due May 19, 2026 at 4:00 p.m. Eastern Time. A hearing is scheduled for May 28, 2026 at 2:00 p.m. Eastern Time before Judge Thomas M. Horan.

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Company Background and Business Operations

Genesis Healthcare, Inc. and several affiliated entities operate healthcare facilities throughout the United States. In July 2025, Genesis filed a petition for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Texas, permitting the company to continue operating while pursuing a plan of reorganization.

Appellants' Claims and the Extend Stay Motion

Multiple groups of plaintiffs, identified in the consolidated appeals as the Brown Appellants, the Almeda Appellants, and the Hoffman Appellants, hold healthcare negligence, personal injury, and wrongful death claims against both Genesis and certain Genesis affiliates that are not debtors in the bankruptcy case. Those non-debtor affiliates include investors and equity holders of Genesis, healthcare professionals who personally committed the alleged wrongful acts, and a staffing service that placed personnel at Genesis facilities.

In September 2025, Genesis filed a motion seeking to extend the automatic stay under 11 U.S.C. § 362 to cover claims against a set of non-debtor parties, including its employees, officers, and directors; certain independent physicians affiliated with Genesis; and parties to whom Genesis would owe contractual indemnification, such as landlords of facilities Genesis rents.

The Brown and Almeda Appellants objected to the motion in late September 2025, specifically raising the absence of an adversary proceeding as required by Federal Rule of Bankruptcy Procedure 7001. The Hoffman Appellants also objected but did not raise the adversary proceeding issue. The Bankruptcy Court held an all-day evidentiary hearing and, six days later, on October 14, 2025, issued the Order (I) Extending the Automatic Stay to the Non-Debtor Defendants and (II) Granting Related Relief (the "Extend Stay Order").

The Extend Stay Order prohibited the continuation of pending lawsuits, execution or enforcement of settlements, and commencement of new lawsuits against non-debtor defendants for the pendency of the Chapter 11 cases and until the effective date of any confirmed Chapter 11 plan. It also barred the severing of claims against non-debtor defendants in non-bankruptcy courts.

The Appeal to the District Court

Three groups of appellants challenged the Extend Stay Order before Senior U.S. District Judge Jane J. Boyle. The Brown Appellants also moved to certify a direct appeal to the U.S. Court of Appeals for the Fifth Circuit under 28 U.S.C. § 158(d)(2)(A), arguing the matter involved a question of public importance and that immediate appeal would materially advance the case.

District Court Analysis

Denial of Direct Appeal Certification

The District Court denied the motion to certify a direct appeal to the Fifth Circuit, finding that none of the four statutory circumstances for direct appeal were present. The court determined that the controlling legal question was governed by clear Fifth Circuit precedent and that the Extend Stay Order affected only the parties to the litigation, not the public at large. The court also found that the Brown Appellants provided no extraordinary or urgent reason for bypassing district court review beyond the time that would be saved by doing so.

Controlling Precedent: Feld v. Zale Corp.

The District Court held that the outcome of the appeals is controlled by Feld v. Zale Corp. (In re Zale Corp.), 62 F.3d 746 (5th Cir. 1995). Under Zale, while a bankruptcy court may issue temporary injunctions against non-debtor defendants under 11 U.S.C. § 105(a) in unusual circumstances, such relief requires: (1) commencement of an adversary proceeding with the full procedural protections of Part VII of the Federal Rules of Bankruptcy Procedure, and (2) proper analysis and findings on the four-part preliminary injunction standard.

The two recognized unusual circumstances that can support such relief are: (1) when the non-debtor and debtor share such an identity of interests that a suit against the non-debtor is essentially a suit against the debtor, and (2) when the third-party action would adversely impact the debtor's ability to accomplish reorganization.

Failure to Conduct an Adversary Proceeding

The District Court found that the Bankruptcy Court's failure to conduct an adversary proceeding constituted independently sufficient reversible error. Because the Brown and Almeda Appellants explicitly requested an adversary proceeding in their objections to the Extend Stay Motion, no waiver occurred. The District Court noted that regardless of how robust the hearing process was, the failure to provide an actual adversary proceeding after appellants invoked their rights was reversible error on its own.

Violations of FRCP 65(d)

The District Court identified additional deficiencies in the form of the Extend Stay Order. The order described the acts restrained by reference to defined terms from the underlying motion rather than in reasonable detail as required by FRCP 65(d)(1)(C). Additionally, by prohibiting the commencement of new lawsuits against non-debtors by any party, not only those with actual notice, the order contravened FRCP 65(d)(2), which limits the binding effect of injunctions to those who received actual notice.

Improper Application of Preliminary Injunction Factors

The District Court found that the Bankruptcy Court improperly assessed two of the four required preliminary injunction factors.

On the first factor, substantial likelihood of success on the merits, the District Court held that success on the merits in this context cannot mean obtaining a permanent injunction (which is prohibited under both Zale and Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024)), nor can it mean the likelihood of obtaining the temporary injunction itself, as suggested by FiberTower Network Services Corp. v. FCC (In re FiberTower Network Services Corp.), 482 B.R. 169 (Bankr. N.D. Tex. 2012). The District Court identified two errors in FiberTower's formulation: it conflated the first factor with the question of the court's authority, and defined success on the merits as the likelihood of receiving the injunction sought, rendering the first factor circular. The court directed the Bankruptcy Court on remand not to follow FiberTower's version of the first factor. Instead, success on the merits must refer to some underlying objective, such as the successful sale of assets or confirmation of a reorganization plan.

On the third factor, the balancing of harms, the District Court found that the Bankruptcy Court focused on Genesis's ability to continue caring for patients and paying employees without adequately considering the ongoing harm to claimants prevented from pursuing relief to which they are entitled. The court noted that the duration and indefiniteness of a restraint increases its burden on claimants, and that proper balancing may result in a narrower injunction than what the movant requested.

Temporary Injunctions Against Non-Debtors Remain Permissible Post-Purdue Pharma

The District Court rejected the Brown Appellants' argument that Purdue Pharma categorically prohibits all stay extensions to non-debtors. The court held that Purdue Pharma addressed only permanent non-debtor releases without claimant consent, and that Zale, which explicitly permits temporary injunctions in appropriate circumstances, remains good law in the Fifth Circuit, a conclusion confirmed by the Fifth Circuit's decision in Highland Capital Management Fund Advisors, L.P. v. Highland Capital Management, L.P., 132 F.4th 353 (5th Cir. 2025).

Genesis's Harmless Error Argument Rejected

Genesis argued that any procedural error was harmless, citing United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010). The District Court distinguished Espinosa as involving the high standard for voiding a final judgment under FRCP 60(b), holding that ordinary principles of appellate review apply where, as here, appellants timely appealed from an adverse ruling on timely objections.

Remand Instructions and Transitional Stay

The District Court remanded the matter to the Bankruptcy Court for further proceedings consistent with the opinion. The court directed that if the Bankruptcy Court considers temporarily enjoining claims against non-debtors on remand, it must comply with Zale and the adversary proceeding procedures under Part VII of the Federal Rules of Bankruptcy Procedure. The opinion notes that it does not purport to identify every procedural error or prescribe every step the Bankruptcy Court must follow on remand.

Pursuant to Federal Rule of Bankruptcy Procedure 8025(a), the District Court's judgment is automatically stayed for fourteen days after entry. For clarity, the District Court specified that, absent further order from the District Court or the Fifth Circuit, the Extend Stay Order will remain in effect through the end of the day on May 15, 2026. The Final Judgment may be appealed to the Fifth Circuit upon issuance.

The Hoffman Appellants' substantive arguments regarding the Extend Stay Order were not addressed on appeal given that vacatur was required on procedural grounds. The Bankruptcy Court may consider those arguments in a proper proceeding on remand if any party seeks a new extension of the stay.

Key Dates and Timeline

Case Information

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 30-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

Spirit Aviation Holdings, Inc., together with its direct and indirect subsidiaries — including Spirit Airlines, LLC, Spirit Finance Cayman 1 Ltd., Spirit Finance Cayman 2 Ltd., Spirit IP Cayman Ltd., and Spirit Loyalty Cayman Ltd. — operated as an ultra-low-cost carrier headquartered at 1731 Radiant Drive, Dania Beach, Florida. As of the filing date, the company operated a fleet of 114 Airbus A320 family aircraft.

Of that fleet, 66 aircraft were held under lease arrangements, while 28 aircraft were owned by Spirit and subject to third-party financings and not already subject to a pending sale motion. An additional 20 owned aircraft are subject to a previously entered sale order [ECF No. 991] authorizing their sale free and clear of liens, claims, and encumbrances, which the company intends to honor and close. The company also owned 18 spare engines and certain aircraft equipment-related spare parts, all encumbered by liens under Spirit's revolving credit facility.

Path to Bankruptcy and Wind-Down

Spirit filed voluntary petitions for chapter 11 relief on August 29, 2025. The U.S. Trustee appointed an Official Committee of Unsecured Creditors in September 2025 and an Examiner in October 2025.

On March 13, 2026, the company filed a plan of reorganization, a related disclosure statement, and a restructuring support agreement in which the company and its consenting DIP lenders memorialized their support for the plan. The motion states that the company had advanced substantially toward completing that reorganization.

The motion states that geopolitical events triggered a massive and sustained increase in fuel prices, producing a rapid and unexpected deterioration in the company's liquidity position. The company and its advisors explored all available capital sources and cost-saving measures but determined that sufficient incremental liquidity could not be obtained. The motion further states that no third parties expressed interest in acquiring or merging with the company, and that the business plan underlying the restructuring support agreement was no longer viable.

As a result, Spirit ceased all passenger flight operations at 3:00 a.m. Eastern time on May 2, 2026. The company requested that the Federal Aviation Administration issue a ground stop for Spirit flights to prevent inadvertent dispatches. The motion states that the timing was coordinated to ensure no aircraft were airborne and that crew members stationed away from their home bases had time to secure hotel accommodations.

The Fleet Wind-Down Motion

Filed on May 4, 2026, two days after the operational shutdown, the motion requests court authorization to dispose of Spirit's remaining owned fleet assets on an emergency basis. The motion was filed alongside other motions addressing separate aspects of the company's wind-down.

The motion covers three categories of owned equipment: the 28 owned aircraft subject to financings (excluding those already covered by the prior sale order), the 18 owned spare engines, and various aircraft spare parts.

For owned aircraft, the proposed approach is to pursue a sale only where the applicable lenders agree to fund a sale process through a Sale Process Agreement. Under such an agreement, the relevant counterparties would reimburse Spirit for reasonable out-of-pocket sale-related expenses, and Spirit would not be required to make any representations, warranties, or indemnifications. Where no such agreement is reached — or where a sale cannot be completed in an economically sound manner — Spirit proposes to abandon the aircraft and make them available to the applicable counterparties on an as-is, where-is basis for repossession.

For spare engines and spare parts, Spirit intends to pursue sales where economically feasible, with abandonment as the fallback. The motion states that continuing to carry financing obligations, maintenance costs, and insurance expenses for equipment no longer generating revenue would reduce estate recoveries for all stakeholders.

Tiered Sale Procedures

The motion establishes a tiered framework for sales, calibrated to the estimated transaction value:

• Transactions at or below $1,000,000: No court notice or hearing is required.
• Transactions above $1,000,000 and at or below $15,000,000: Spirit must file a sale notice identifying the equipment, proposed buyer, and proposed price, and serve that notice on designated transaction notice parties. Those parties have 14 days to object. If no timely objection is received, or if any objection is consensually resolved, the sale may proceed without further court order. If an objection cannot be resolved, court approval is required.
• Transactions above $15,000,000: Spirit must file a motion with the court seeking approval.

Transaction Value is defined as the net benefit estimated to be realized by the estate in a private sale, or the book value of the equipment to be sold. For purposes of the sale procedures, Transaction Value is determined without consideration of whether the property is to be transferred free and clear of encumbrances.

Tiered Abandonment Procedures

A parallel tiered framework governs abandonments, based on the book value of the equipment:

• Book value at or below $5,000,000: Spirit must provide seven days' notice to the relevant counterparty and known interest holders. No hearing is required, and abandonment may proceed after that period unless it constitutes DIP Collateral requiring lender consent.
• Book value above $5,000,000: Spirit must file a formal abandonment notice with the court and serve it on the transaction notice parties. Those parties have seven days to object. If no timely objection is received, abandonment may proceed. If an objection cannot be resolved, court approval is required.

Claims arising from any abandonment effected pursuant to the proposed order must be filed within 30 days of the applicable abandonment effective date. Any claim not timely filed would be irrevocably barred.

Upon abandonment, Spirit would make the equipment and related aircraft records available to the applicable counterparty at the equipment's then-current location in as-is, where-is condition. Spirit would maintain existing insurance coverage and storage maintenance programs for each item of equipment until the earlier of the abandonment effective date or the date the applicable counterparty takes possession. Thereafter, Spirit's obligations to insure and maintain the equipment would cease unless otherwise agreed.

Legal Framework

The motion invokes Section 363 of the Bankruptcy Code as authority for the proposed sales, relying on the business judgment standard as applied in the Second Circuit. The motion argues that private sales without a formal auction are appropriate given the company's limited liquidity and the fact that certain owned equipment had already been marketed in connection with the earlier aircraft sale process.

Proposed sales would be conducted free and clear of all liens, claims, interests, and encumbrances under Section 363(f) of the Bankruptcy Code, with encumbrances attaching to net sale proceeds in order of priority.

For abandonments, the motion relies on Section 554(a) of the Bankruptcy Code, which permits a debtor to abandon property that is burdensome to the estate or of inconsequential value and benefit to the estate. The motion states that the abandonment procedures were developed after consultation with the Official Committee of Unsecured Creditors and certain secured lenders, and are consistent with procedures previously approved in this case and in other airline chapter 11 cases.

The motion also requests a modification of the automatic stay under Section 362 to allow counterparties to take possession of, transfer, and dispose of abandoned equipment, and to facilitate aircraft registry administration. Additionally, the motion requests a declaration that making equipment and aircraft records available for pickup satisfies the company's surrender and return obligations under Section 1110(c) of the Bankruptcy Code, to the extent applicable.

The motion notes that Revolving Priority Collateral, as defined in the Amended and Restated Credit and Guaranty Agreement dated March 12, 2025, is excluded from the sale and abandonment procedures without the consent of the revolving credit facility's administrative agent.

Key Parties

Key parties in the case include the Official Committee of Unsecured Creditors, the Ad Hoc Committee of Senior Secured Noteholders, Citibank, N.A. as revolving credit facility administrative agent, Wilmington Trust, National Association as collateral agent, the DIP lenders and DIP facility agent, and the Federal Aviation Administration. An Examiner was appointed in the case in October 2025.

Professional Representation

Spirit's fleet counsel is Debevoise & Plimpton LLP, 66 Hudson Boulevard East, New York, New York 10001.

Key Dates

Court and Case Information

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 50-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

Artstock was founded in 1985 in Portland, Maine as an independent retailer of fine art materials, serving artists, students, and educators. Over the following decades, the company expanded its geographic footprint and broadened its product offerings to include children's art products, craft materials, and school supplies. The disclosure statement describes the company as one of the largest independent art materials retailers in the United States, with stores across multiple states and an online presence.

The company transitioned to employee ownership through an Employee Stock Ownership Plan (ESOP), which was terminated in 2025 due to operational costs and difficulties. All equity interests in the debtor are held by Artstock Holding Company, Inc.

Events Leading to Bankruptcy

On December 21, 2025, Artstock filed a voluntary Chapter 11 petition in the District of Maine. At the time of filing, the company was operating 18 stores nationwide. The debtor's secured debt at the petition date included approximately $1,346,370 owed to Cambridge Savings Bank under a line of credit (originally with a maximum borrowing capacity of $4 million, reduced to $2 million at the petition date); approximately $1,894,329 owed to the U.S. Small Business Administration; and $4,357,500 owed to Art Supply Enterprises under a settlement agreement for inventory purchases, measured as of December 31, 2025. The Internal Revenue Service also filed a tax lien of $85,872.21, though the debtor contends the lien is junior to all other secured creditors and that IRS claims will be treated as priority tax claims rather than secured claims.

Reorganization Strategy

Since the petition date, Artstock has implemented a series of operational and financial measures to reduce its cost structure. The company has closed or is in the process of closing four stores — in San Diego, Kansas City, Chestnut Hill (Pennsylvania), and Industry City (Brooklyn, New York) — and intends to continue operating the remaining 14 locations following plan confirmation.

Restructuring steps taken during the case include obtaining rent concessions and lease modifications from multiple landlords; reducing corporate overhead through a senior IT staff position elimination and a salary reduction for another senior staff member; renegotiating IT and software service agreements; and implementing tighter purchasing and inventory controls to preserve liquidity. The company has also transferred overstocked inventory between store locations to improve efficiency.

On March 4, 2026, the Bankruptcy Court entered a final order authorizing use of cash collateral, following multiple interim orders.

The Proposed Plan of Reorganization

The Plan proposes a restructured balance sheet to allow the company to continue operating as a going concern. The effective date is projected at approximately July 1, 2026. On the effective date, all assets of the estate vest in the reorganized debtor free and clear of claims and interests. The Plan projects a 100% recovery for all classes of creditors, with repayment structured as follows.

Treatment of Claims and Interests

Cambridge Savings Bank (Class 1): The secured claim, expected to be reduced to approximately $1,286,370 by the end of May 2026 based on ongoing payments, will be repaid on a 15-year amortization schedule with a balloon payment on the fifth anniversary of the effective date. Interest accrues at the prime rate plus 1%. Monthly payments are estimated at approximately $12,108.29. Cambridge Savings will also receive 20% of the debtor's annual Net Disposable Income, paid concurrently with distributions to general unsecured creditors, with the Class 1 claim re-amortized to account for any such additional payments.

SBA (Class 2): The approximately $1,894,329 secured claim will be repaid in accordance with the existing SBA loan documents, with the maturity date extended by 10 years and payments re-amortized over the extended term. No default interest, late fees, or other fees arising from a pre-effective-date default will be owed.

Art Supply Enterprises (Class 3): The $4,357,500 claim will be treated under a 20-year amortization schedule with a balloon payment on the seventh anniversary of the effective date, at prime plus 1%. The debtor asserts the claim is likely unsecured because the collateral securing it — inventory specifically purchased from Art Supply Enterprises — had been sold as of the petition date. The debtor also asserts that the claim may be held by a Chapter 7 trustee in a separate bankruptcy proceeding rather than by Art Supply Enterprises. To the extent the claim is determined to be fully or partially unsecured, it would be treated as a general unsecured claim in Class 7.

IRS Secured Tax Claims (Class 4): Deferred cash payments over a period not to exceed five years from the petition date, in equal annual installments with simple interest at the Federal Judgment Rate in effect as of the effective date.

Priority Wage Claims (Class 5): Satisfied in accordance with the debtor's pre-petition policies, capped at $17,150 per individual per the Bankruptcy Code. Amounts above the statutory cap are treated as general unsecured claims in Class 7.

Priority Non-Tax Claims (Class 6): Cash payment in full on the later of the effective date or the date the claim becomes allowed.

General Unsecured Claims (Class 7): Pro rata payments of 80% of Projected Net Disposable Income over a seven-year payment period. The first payment is due on or before January 31, 2027, with subsequent payments on each successive January 31st. The seventh and final payment includes any remaining outstanding amounts. Class 7 claims do not accrue interest. Art Supply Enterprises and an unsecured creditor identified as Adlerstein each entered into subordination agreements with Cambridge Savings prior to the petition date, requiring that any Plan distributions owed to them be paid directly to Cambridge Savings until its obligations are fully satisfied.

Equity Interests (Class 8): Artstock Holding Company, Inc. will continue as the sole equity holder post-confirmation. No equity distributions may be made until all other claims under the Plan are satisfied. (The disclosure statement is internally inconsistent in labeling this class: the body text identifies equity interests as Class 8, while the classification table on page 16 labels the same class as Class 9, with no Class 8 appearing in the table.)

Liquidation Analysis and Best Interests Test

The disclosure statement includes a liquidation analysis demonstrating that a Chapter 7 liquidation would produce materially worse outcomes for creditors than the proposed Plan. Based on projected conditions as of July 1, 2026, the analysis models a six-week store closing sale across the 14 locations:

Estimated beginning cash: $300,000

Estimated inventory liquidation sales: $3,589,740

Store closing costs (rent, payroll, exit costs, fees): $1,696,501

Chapter 7 trustee fees: $50,895

Net inventory proceeds: $1,842,344

Miscellaneous asset sales (shelving/displays, 14 stores at $1,000 each): $14,000

Total available cash: $2,156,344

After satisfying Cambridge Savings ($1,286,370) and the SBA ($1,894,329), the estate would face a deficit of approximately ($1,024,355), resulting in no recovery for general unsecured creditors. Store-level net cash proceeds in the liquidation scenario ranged from 34% to 67% of inventory value, with an aggregate recovery rate of 53% of inventory.

Avoidance Actions

In the 90 days prior to the petition date, the debtor made disbursements to trade creditors totaling approximately $4,720,866.15. Claims to avoid and recover those transfers may only be brought against parties who received more than $8,575 in aggregate during that period, per 11 U.S.C. § 547(c)(9). The debtor has not yet completed its analysis of potentially avoidable transfers, and the right to pursue avoidance actions is preserved under the Plan.

Key Dates and Deadlines

April 27, 2026: General Bar Date for filing proofs of claim (including 503(b)(9) claims)

June 19, 2026: Governmental Bar Date

~July 1, 2026: Projected Plan Effective Date

60 days after Effective Date: Non-Ordinary Course Administrative Claims Bar Date; Professional Fee Claims deadline

90 days after Effective Date: Claims Objection Deadline

January 31, 2027: First annual payment to Class 7 general unsecured claimants

5th anniversary of Effective Date: Cambridge Savings balloon payment due

7th anniversary of Effective Date: Art Supply Enterprises balloon payment due

All impaired classes are entitled to vote on the Plan. Acceptance requires two-thirds in dollar amount and more than one-half in number of voting claims in each class. The debtor reserves the right to seek confirmation under the cram-down provisions of 11 U.S.C. § 1129(b) if any impaired class rejects the Plan.

Professional Representation and Court Information

Court: United States Bankruptcy Court, District of Maine

Case Number: 25-20305

Presiding Judge: Honorable Peter G. Cary

Docket Reference: Doc 259, filed April 20, 2026

Counsel for Debtor: Bernstein, Shur, Sawyer & Nelson, P.A., Portland, Maine

Counsel for Official Committee of Unsecured Creditors: Verrill Dana LLP (authorized effective January 15, 2026)

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 35-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Cyprus Mines Corporation, a Chapter 11 debtor before the United States Bankruptcy Court for the District of Delaware, received court authorization on April 21, 2026 to borrow an additional $3,000,000 in debtor-in-possession financing, bringing the total aggregate principal available under its DIP credit facility to $83,672,370. The order, entered by the Honorable Laurie Selber Silverstein, authorizes the seventeenth amendment to the company's Amended and Restated Superpriority Debtor-in-Possession Credit Agreement with lender Cyprus Amax Minerals Company.

Case Background and Business Operations

Cyprus Mines Corporation filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on February 11, 2021, before the United States Bankruptcy Court for the District of Delaware (Case No. 21-10398). The debtor's address is listed as 4340 E. Cotton Center Blvd., Suite 110, Phoenix, Arizona.

The case involves talc-related personal injury litigation. A Tort Claimants' Committee is among the parties bound by the court's financing orders. The case is related to the proceedings of Imerys Talc America, Inc., et al. (Case No. 19-10289 (LSS)), which is pending before the same judge.

DIP Financing History

The debtor and lender, Cyprus Amax Minerals Company, entered into the original Superpriority Debtor-in-Possession Credit Agreement on the same day the Chapter 11 petition was filed in February 2021. The Bankruptcy Court authorized that financing on April 5, 2021.

In June 2022, the parties amended and restated the DIP credit agreement in its entirety. Between September 30, 2022 and February 27, 2026, the borrower and lender entered into sixteen additional amendments to that amended and restated agreement, with the Bankruptcy Court entering authorizing orders as necessary and applicable. The seventeenth amendment was executed as of March 30, 2026 and filed with the court as Exhibit 1 to the order on April 21, 2026 (Doc. 3869-1).

The Seventeenth Amendment: Key Changes

The seventeenth amendment makes three substantive changes to the DIP credit facility:

First, the DIP Loan Commitment Amount is increased to $83,672,370, subject to reductions for any amounts paid by Cyprus Amax Minerals Company pursuant to Sections 7.2, 7.3, or 7.4 of the Cyprus Settlement Agreement, plus any PIK Payment Amounts accrued under the facility. The $3,000,000 increase in new money DIP Loans — defined in the order as "Additional DIP Loans" — brings the facility to this updated ceiling.

Second, the maturity date of the DIP Loans is extended to April 30, 2026, or the earlier of the consummation date or the date on which the DIP Loans are accelerated pursuant to the agreement's default provisions.

Third, Section 8(n) of the agreement — the plan confirmation milestone — is amended and restated to make an event of default contingent on two conditions, either of which, if unmet, triggers default. To avoid default under that section, both (i) Imerys Talc America, Inc. and the debtor must each have filed modified Chapter 11 plans by September 19, 2025 with modifications acceptable to the lender in its sole discretion, and (ii) orders confirming (or recommending confirmation of) an Acceptable Plan for the debtor and the modified plan filed by Imerys Talc America, Inc. must be entered by the Bankruptcy Court on or before April 30, 2026.

The maturity date extension and plan confirmation milestone amendments became effective immediately upon execution by the parties on March 30, 2026, while the increase to the DIP Loan Commitment Amount became effective only upon entry of the court's order on April 21, 2026.

Court Findings and Legal Basis

The court found that Cyprus Mines Corporation has an immediate need to obtain the additional DIP Loans to pay administrative costs of its Chapter 11 case, and that access to sufficient working capital and liquidity through the incurrence of new indebtedness is necessary and vital to the preservation and maintenance of the debtor's estate.

The court further found that the financing from Cyprus Amax Minerals Company represents the best and only available financing option for the debtor under the circumstances, and that the debtor is unable to obtain financing on more favorable terms from any other source, or to obtain adequate unsecured credit absent the superpriority administrative expense status conferred by the order.

The terms of the amendment were found to reflect the debtor's exercise of prudent business judgment consistent with its fiduciary duties, and to constitute reasonably equivalent value and fair consideration. The court found the amendment was negotiated in good faith and at arm's length between the parties.

The Additional DIP Loans are granted superpriority administrative expense claim status under section 364(c)(1) of the Bankruptcy Code, ranking pari passu in right of payment and security with the original DIP Loans, and subject only to the Carveout as defined in the original DIP Order. Cyprus Amax Minerals Company is entitled to the full protections of section 364(e) of the Bankruptcy Code in the event the order is vacated, reversed, or modified on appeal.

Talc Litigation Protections

The seventeenth amendment reaffirms that an event of default occurs under the credit agreement if a bankruptcy court order staying, temporarily restraining, or preliminarily enjoining all persons from commencing or continuing any action against the lender relating to any Talc Personal Injury Claim ceases to be in full force and effect — whether in this Chapter 11 case or in the related Imerys Talc America proceedings.

Effectiveness and Binding Effect

The court's order is immediately effective and enforceable upon entry, with all applicable stay periods under the Bankruptcy Rules and Federal Rules of Civil Procedure expressly waived. The order is binding on all parties in interest in the case, including Cyprus Amax Minerals Company, the Tort Claimants' Committee, any statutory or non-statutory committees, the debtor, and their respective successors and assigns — including any subsequently appointed chapter 7 or chapter 11 trustee, examiner, or other fiduciary appointed as a legal representative of the debtor.

The court retains jurisdiction to implement, interpret, and enforce the provisions of the order, with that retention of jurisdiction surviving the confirmation and consummation of any chapter 11 plan.

Key Deadlines

April 30, 2026: Extended maturity date for the DIP Loans; deadline for entry of orders confirming (or recommending confirmation of) an acceptable chapter 11 plan for both Cyprus Mines Corporation and Imerys Talc America, Inc.

Case and Court Information

The case is captioned In re: Cyprus Mines Corporation, Case No. 21-10398 (LSS), pending before the United States Bankruptcy Court for the District of Delaware, before the Honorable Laurie Selber Silverstein. The order at issue is Docket Item 3869, filed April 21, 2026. The seventeenth amendment is filed as Exhibit 1 to that docket entry (Doc. 3869-1). No law firm representation is identified in the court order or amendment documents.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 19-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

BRD Land & Investment is a South Carolina partnership that operated as a land entitlement and permitting company, focusing on the acquisition of raw, undeveloped parcels for sale to national and regional homebuilders as shovel-ready projects. The company's operations encompassed due diligence activities including surveys, geotechnical and environmental studies, coordination with municipal planning departments for rezoning and site plan approvals, and engagement with engineering firms to complete the permitting process.

The two affiliated debtors served project-specific functions within BRD's enterprise. BRDL Warden Station, LLC holds title to real property in Horry County, South Carolina, associated with BRD's Warden Station project. BRDL Warden Station Holding Co, LLC serves as the sole member and a manager of Warden Station, LLC, with BRD as Holding Co's own sole member.

BRD is owned through a collection of investment entities and trusts, with BRD Land & Investment Management, LLC serving as managing partner. The debtors' primary assets consist of ten owned real estate parcels as well as contractual rights to purchase additional properties contingent on the completion of entitlement work.

Events Leading to Bankruptcy

The debtors operated profitably until 2025, when the residential development industry experienced a decline in first-time homebuyer activity at levels not seen since the 2008 financial crisis, according to the disclosure statement.

This market contraction caused homebuilders to cancel or renegotiate land purchase agreements with the debtors, resulting in the termination of 13 projects and the nonviability of an additional 7 projects. The combined effect was a reduction in total projected pipeline gross revenue of approximately $390 million in 2025.

Simultaneously, DLP Lending Fund, LLC and DLP Capital Lending CH, LLC — the debtors' secured lender holding approximately $18 million in debt secured by deeds of trust on properties in Leland, North Carolina; Vance, South Carolina; and Conway, South Carolina — demanded accelerated principal payments as a condition to allowing the debtors to close on pending sales encumbered by DLP's liens. The combination of lost revenue and lender demands produced a liquidity crisis that prompted the debtors to file voluntary Chapter 11 petitions on February 24, 2026.

Following the petition date, the debtors used the bankruptcy process to market both their owned real property and their executory contracts to purchase additional real property, and to identify potential stalking horse bidders. The debtors determined that reorganization was not feasible and that an orderly liquidation through a Liquidating Agent would maximize value to creditors.

The Proposed Liquidation Plan

The Joint Plan of Liquidation, filed concurrently with the disclosure statement, provides for the sale of the debtors' owned real property and the assignment of executory contracts through a court-appointed Liquidating Agent, with net proceeds distributed to creditors according to the Bankruptcy Code's priority scheme.

Real Property Portfolio

The debtors' ten owned properties, as appraised on November 1, 2025, are listed in the table below. The Old Town Creek / Pinewood property had a pending sale as of the filing date.

Liquidating Agent

Upon confirmation, a Liquidating Agent — to be identified by notice filed at least 14 days before the deadline to object to confirmation — will assume sole, autonomous decision-making authority over the debtors and Wind-Up Debtors. The Liquidating Agent will oversee asset sales, prosecute avoidance actions, object to claims, and administer all wind-up affairs through case closure. The Liquidating Agent is compensated at an hourly rate and is not entitled to a commission on asset sales.

Liquidation Budget

The cash collateral and liquidation budget, covering April through December 2026, projects beginning cash of approximately $1.19 million and ending cash of approximately $16.76 million. Revenue sources include a McGill sale ($2.0 million in April 2026), contract assignments ($1.0 million total), and property sales ($13.7 million total). The budget projects an estimated payout of 16% to unsecured creditors.

Best Interests Analysis

The debtors' hypothetical Chapter 7 liquidation analysis estimates that a trustee-administered liquidation would yield realized values of $15.2 million to $17.5 million on owned property. After satisfying the $14.6 million secured portion of DLP's claims, deducting estimated liquidation costs of 7%, and deducting up to $480,000 in Chapter 7 and Chapter 11 administrative costs, the net amount available to general unsecured creditors in a hypothetical Chapter 7 case would range from approximately $1.4 million (1% recovery) to approximately $3.3 million (3% recovery). The Chapter 11 plan projects a 16% recovery by comparison.

Treatment of Claims and Interests

The plan classifies claims and interests into eight classes, all of which are impaired and entitled to vote:

Class 1 — Allowed Secured Tax Claims: Paid in full in cash on the effective date, on such other terms as may be mutually agreed between the holder and the Wind-Up Debtors, on the distribution date, or upon closing of the relevant property sale, at the Wind-Up Debtors' option.

Classes 2, 3, and 4 — DLP Secured Claims (Warden Station, Clark, Pinewood): Each DLP secured claim is paid from the net sale proceeds of its respective collateral property at closing. DLP retains its liens at existing priority until each claim is satisfied. Any remaining deficiency is treated as a general unsecured claim in Class 7.

Class 5 — Other Secured Claims: Paid from net sale proceeds of collateral upon closing. Remaining deficiencies treated in Class 7.

Class 6 — Allowed Priority Claims: Paid pro rata from Net Estate Cash on the distribution date, subject to higher-priority distributions.

Class 7 — Allowed General Unsecured Claims: Holders receive pro rata distributions of remaining Net Estate Cash following satisfaction of Class 6 claims. The estimated recovery is approximately 16%. General unsecured liabilities are estimated at $108,043,297, including approximately $74 million in unsecured promissory notes owed to more than 100 lenders and approximately $9 million in ordinary course business obligations.

Class 8 — Equity Interests: Holders retain equity interests in the Wind-Up Debtors and receive distributions of any remaining Net Estate Cash after all higher-priority claims are satisfied. If higher-priority claims are not fully satisfied, equity interests will be cancelled and the Wind-Up Debtors dissolved under applicable law.

Administrative and Priority Tax Claims are not classified under the plan and are to be paid in full in cash as soon as practicable after the later of the effective date, the date on which sufficient cash becomes available, or the date the claim becomes allowed.

Effects of Confirmation and Plan Protections

Upon the effective date, all assets of the debtors vest in the Wind-Up Debtors free and clear of all claims, liens, interests, and encumbrances, except as otherwise provided by the plan or the confirmation order.

The plan includes a permanent injunction barring all persons from collecting, prosecuting, enforcing, or otherwise asserting any pre-effective date claims against the debtors or Wind-Up Debtors, with limited exceptions for distributions expressly due under the plan and claims not cancelled by the plan.

The plan also provides for exculpation of the debtors and their present and former employees, representatives, counsel, and professionals from claims arising out of the bankruptcy case, excluding willful misconduct or gross negligence.

Key Dates and Deadlines

Tax Considerations

Pursuant to Section 1146 of the Bankruptcy Code, transfers of property under the plan — including the execution of deeds or other instruments — are exempt from stamp taxes and similar transfer taxes. The disclosure statement notes no potential material federal tax consequences to the debtors. Creditors are advised to consult their own tax advisors regarding the income tax consequences of distributions received under the plan.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 48-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

Carbon Health Technologies, Inc. (CHTI), headquartered at 500 East Remington Drive, Suite 20, Sunnyvale, California, operates a network of healthcare clinics that collectively serve approximately 800,000 patients per year. The company and its debtor affiliates operate as debtors in possession under chapter 11 of the Bankruptcy Code, continuing to manage their businesses and properties in the ordinary course.

Events Leading to Bankruptcy

On February 2, 2026, CHTI and its affiliated entities each commenced voluntary chapter 11 cases before the Southern District of Texas, Houston Division, under Case No. 26-90306 (CML), jointly administered before Judge Lopez. On February 16, 2026, the Office of the United States Trustee, Region 7, appointed an Official Committee of Unsecured Creditors (the "Creditors' Committee"). No trustee or examiner has been appointed in the cases.

The Dual-Track Restructuring Strategy

The debtors commenced these chapter 11 cases to conduct both a postpetition marketing and sale process and, in parallel, pursue a chapter 11 plan. The dual-track approach was designed to maximize value on an efficient timeline. The first track involved a postpetition marketing and sale process (the "Sale Process"), initiated when the debtors filed a bid procedures motion on February 3, 2026. The court entered the Bid Procedures Order on February 10, 2026, which formally authorized the Sale Process and permitted Future Solution Investments LLC to submit a credit bid on account of its DIP and prepetition secured claims pursuant to Section 363(k) of the Bankruptcy Code.

The second track involved the confirmation of a chapter 11 plan premised upon a debt-for-equity exchange. On March 4, 2026, the debtors filed a Combined Disclosure Statement and Plan of Reorganization, subsequently amended on April 7, 2026. On April 8, 2026, the court entered a Solicitation Order conditionally approving the Disclosure Statement and scheduling a combined confirmation hearing for May 27–29, 2026 — anticipated to be a fully contested three-day trial.

The Sale Process and Its Results

The postpetition Sale Process, conducted under court-approved bid procedures, did not yield an actionable proposal. The debtors report that no single bid or combination of bids resulted in a proposal that provided value in excess of the liens securing the DIP Claims and Prepetition Secured Claims. In the aggregate, all bids received did not come close to $100 million.

Administrative Expenses and the Risk of Administrative Insolvency

The debtors contend that contested confirmation proceedings — including extensive discovery and a fully contested three-day trial scheduled for May 27–29, 2026 — have driven professional fees and other administrative costs far beyond the amounts originally budgeted for these chapter 11 cases. The resulting fee burn has created a meaningful risk of administrative insolvency, raising the prospect that available DIP financing could be exhausted before the confirmation hearing concludes and leaving the estates unable to satisfy administrative claims as they come due.

If administrative expenses continue to accrue at the current rate, the debtors warn, the estates may need to pivot from plan confirmation to a sale under section 363 of the Bankruptcy Code on short notice. The supplemental motion is designed to provide a court-authorized mechanism for that contingency, ensuring that the debtors retain the ability to consummate a value-maximizing going-concern transaction if the Plan is withdrawn or not confirmed.

The Proposed Credit Bid Sale

The debtors and Future Solution Investments LLC executed an Asset Purchase Agreement (the "APA") dated April 21, 2026. The proposed Sale Transaction contemplates a $100 million credit bid consisting of the Prepetition Credit Bid Amount (excluding the MOIC, or "multiple on invested capital," component, which is the subject of a pending challenge by the Creditors' Committee), the DIP Credit Bid Amount, and the Restructured Indebtedness — plus the assumption of certain specified liabilities. The allocation among these three components is to be determined by the buyer in its sole discretion prior to closing.

The APA is structured as a contingency mechanism. The agreement becomes effective only if: (i) the court declines to confirm the debtors' reorganization plan, or (ii) the debtors, with the buyer's consent, withdraw, terminate, or otherwise abandon the plan. The outside closing date under the APA is June 30, 2026.

The debtors state that they continue to believe the Plan is a better alternative to the Sale, as the Plan provides for payment of all administrative expenses plus a certain recovery to general unsecured creditors. However, the debtors contend that if the Plan is not confirmed or is withdrawn, the Sale is preferable to a liquidation.

The debtors argue that the Sale Transaction represents the value-maximizing going-concern alternative in that circumstance, given that the Sale Process produced no bids approaching $100 million. The debtors further assert that additional marketing efforts are unlikely to yield superior value, as the market has already had the opportunity to bid through a postpetition sale process conducted pursuant to court-approved bid procedures.

Key Terms of the Asset Purchase Agreement

The APA provides for the sale of substantially all of the debtors' assets free and clear of all liens, claims, and encumbrances, with certain exclusions. Excluded assets include the debtors' rights under the APA itself, certain deposit and bank accounts, Excluded Cash, certain D&O and other insurance policies, Excluded Contracts, securities, tax and corporate records, causes of action against current and former insiders, and avoidance actions (except against continuing vendors).

Assumed liabilities include post-closing executory obligations, postpetition trade payables, obligations to Transferred Employees, and all Cure Costs associated with assumed contracts and leases. Excluded liabilities encompass all pre-closing liabilities not expressly assumed, including employee benefit plan liabilities, pre-closing accounts payable, indebtedness, taxes, violations of or obligations under law, and third-party payor overpayments.

The APA provides that most of the debtors' existing employees are expected to transition to the buyer as Transferred Employees. Excluded Cash provisions include up to $250,000 reserved for the sellers' wind-down expenses and an additional $25,000 reserved for a chapter 7 trustee or their professionals in the event of a subsequent conversion.

Contract Assumption and Assignment

In connection with the proposed Sale Transaction, the debtors have provided counterparties with a series of cure notices. An Initial Cure Notice was filed on March 5, 2026, with an objection deadline of March 17, 2026. A Second Cure Notice was filed on April 16, 2026, and a Supplemental Cure Notice was filed on April 20, 2026. The objection deadline for both the Second and Supplemental Cure Notices is May 13, 2026.

The debtors seek authority to assume and assign executory contracts and unexpired leases to the buyer under Section 365 of the Bankruptcy Code, with Cure Costs to be paid as part of the Assumed Liabilities. For contracts where only the Cure Cost amount is disputed, the debtors request that assumption and assignment be permitted with disputed amounts placed in a segregated account pending resolution.

Legal Framework

The debtors invoke several provisions of the Bankruptcy Code in support of the motion. Under Section 363(b), which permits sale of estate property outside the ordinary course of business after notice and a hearing, the debtors assert that articulated business justification exists for the Sale Transaction under established Fifth Circuit precedent. The motion identifies four principal business justifications: (1) the going-concern sale represents the most value-maximizing alternative following a postpetition sale process that yielded no actionable bids; (2) the sale provides certainty to counterparties of contracts and leases and enables employees to retain their jobs; (3) the buyer, as the primary creditor constituent, supports the sale and is credit bidding with undisputed postpetition and prepetition secured debt; and (4) without the sale, the estate would need to convert to chapter 7, resulting in forced liquidation of assets, layoffs of a significant portion of employees, and a loss of patient care for most or all of the 800,000 people per year who rely on the debtors' clinics.

Under Section 363(f), the debtors seek to sell the assets free and clear of all interests, asserting that at least one of the five disjunctive conditions is satisfied — specifically, that the Prepetition Agent and DIP Agent have consented to the sale free and clear, satisfying Section 363(f)(2). The debtors also seek a finding under Section 363(m) that the buyer qualifies as a good faith purchaser, noting the APA was negotiated at arm's length and that the buyer is represented by qualified counsel and has not engaged in conduct indicating a lack of good faith. The debtors further seek waiver of the 14-day stays imposed by Bankruptcy Rules 6004(h) and 6006(d) to allow the Sale Transaction to close as soon as possible.

Consequences of Failure to Close

The motion states that failure to consummate the Sale Transaction and conversion of these cases to chapter 7 would substantially reduce creditor recoveries, result in forced liquidation of the assets, layoffs of a significant portion of the debtors' employees, and a loss of patient care for most or all of the 800,000 people per year who rely on the debtors' clinics.

Key Dates and Deadlines

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 134 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and the Withdrawal

Yellow Corporation participated in numerous multiemployer pension plans while operating as one of the country's largest trucking companies. The company discontinued business operations in July 2023 and filed for Chapter 11 bankruptcy shortly thereafter. Under ERISA, that cessation of business constituted a complete withdrawal from all of its multiemployer pension plans, triggering withdrawal liability claims totaling approximately $7.4 billion across 16 plans. Central States, Southeast and Southwest Areas Pension Fund additionally asserted a claim of approximately $917 million under a 2014 contribution guaranty agreement, and the New York State Teamsters Conference Pension & Retirement Fund asserted a liquidated damages claim for $76 million.

The claims triggered years of complex litigation. The Court issued multiple partial summary judgment rulings between 2024 and 2025 on contested ERISA calculation issues, including the validity of PBGC regulations, the application of ERISA's 20-year cap, the enforceability of contractual undertakings to pay enhanced withdrawal liabilities, and the proper interest rate for calculating unfunded vested benefits. The Third Circuit affirmed the Court's November 2024 rulings in September 2025. A petition for certiorari was filed in February 2026.

The Five-Step Settlement Methodology

The settlements were structured around a five-step methodology applied uniformly across most of the pension plans. In the first step, the parties determined unfunded vested benefits using an interest rate weighted 60 percent to the minimum funding rate and 40 percent to the rate originally selected by the plan's actuary. This represented a compromise of the Court's February 2025 ruling, which had followed three circuits in holding that the rates must be similar. The second step determined annual payments conforming with the Court's rulings on the effect of 2014 ERISA amendments. The third step capped each claim at the lesser of total unfunded vested benefits or 20 years of annual payments.

The fourth step differentiated between plans that received special financial assistance under the American Rescue Plan Act and those that did not. Plans without special financial assistance had their claims discounted at five percent, a compromise figure. The fifth step reduced each claim by 25 percent to account for ERISA's insolvency cap under § 1405(b), which the Court had ruled would require a 50 percent reduction if the debtors proved insolvency.

The Standard of Review

The opinion devoted substantial analysis to the standard applicable to settlement approval when a party in interest has objected to the underlying claims. The Court adopted an intermediate standard drawn from In re DVR, affording the debtor in possession some deference while still conducting a searching inquiry into reasonableness. The Court rejected the most deferential "business judgment" approach and the strictest approach that would require full claims adjudication before settlement. The Court noted that recent decisions, including Truck Insurance Exchange v. Kaiser Gypsum Co. from the Supreme Court and the Third Circuit's In re FTX Trading Ltd., effectively eliminated the most deferential approach.

The Court emphasized that the familiar language about the "lowest point in the range of reasonable" does not support rubber-stamping settlements. A bankruptcy court must hear out objections and satisfy itself that the settlement is in fact reasonable, while still recognizing that the debtor in possession's business judgment is entitled to some measure of deference.

Settlements Approved

The Court approved settlements with 13 of the 16 pension plans, finding the five-step methodology reasonable in light of the risk that the Court's prior rulings could be reversed on appeal.

On the interest rate compromise, the Court noted that the 60/40 weighting effectively ascribed a 40 percent likelihood of reversal. The Court's own assessment placed that probability closer to 33 percent, but found 40 percent within the range of reasonable. On the five percent present value discount rate, the Court found the resolution modest given the enormous potential variation in total claims. On the 25 percent insolvency reduction (half of the 50 percent the Court had ruled applicable), the Court found the legal arguments for reversal on the ordering of caps to be weak but acknowledged factual uncertainty about the debtors' solvency as of the July 2023 withdrawal date, noting that the debtors' equity traded for positive value post-petition.

The Court also approved the settlement of Central States' guaranty claim. The $917 million claim, which the Court had found to be an unenforceable penalty clause under Illinois law, was settled for $165 million, approximately 18 percent of the asserted amount. The Court concluded there was roughly an 18 percent chance an appellate court might reverse that ruling. The Court separately approved the Local 710 settlement, finding that a hypothetical "fresh start" accounting issue did not warrant departing from the common methodology.

The Court further approved the settlement's gifting provision, under which the settling pension plans agreed to contribute approximately $7.4 million (referenced elsewhere in the opinion as $7.5 million) to compensate creditors holding non-joint-and-several claims for the dilutive effect of the settlements. Following In re Nuverra Environmental Solutions, the Court read Third Circuit precedent in In re Armstrong World Industries to permit horizontal gifting. The Court rejected the objection that this violated the Supreme Court's reasoning in Czyzewski v. Jevic Holding Corp., finding the gift would not violate existing law even if included in the plan itself.

Settlements Denied

The Court denied approval of three settlements.

New York Teamsters. The proposed settlement of $326.5 million was denied. The five-step methodology yielded a withdrawal liability claim of $250.8 million. The remaining $75.7 million was attributable to liquidated damages, but the fund's own policies capped liquidated damages at 10 percent of withdrawal liability, which would produce a maximum of $25.1 million. The Court also gave weight to the objector's argument that ERISA § 1451(a) requires an enforcement action as a predicate for liquidated damages, finding it warranted at least a 20 percent further reduction. The Court offered the parties an alternative: a revised settlement at $270.8 million ($250.8 million in withdrawal liability plus $20 million in liquidated damages). The Official Committee of Unsecured Creditors joined in the objection to this settlement.

Locals 617 and 1730. Both settlements departed from the five-step methodology with no justifying rationale. For Local 617, the methodology yielded $0.1 million but the settlement was $3.0 million. For Local 1730, the methodology yielded $2.3 million but the settlement was $7.5 million. Even accounting for Local 1730's mass withdrawal exception (which removes the 20-year cap), the maximum claim was only $5.1 million. The debtors' financial advisor acknowledged at the evidentiary hearing that these settlements were notably less favorable than others and were not rooted in the settlement methodology. The Court suggested the parties either settle at the amounts the methodology yields or pursue § 502(c) estimation for prompt resolution.

Settlement Comparison

Path Forward

The Court noted that the settlements with each pension plan are severable, independent agreements. The parties may submit a proposed order approving the settlements the Court found reasonable, allowing that order to become final and appealable while further proceedings continue on the denied settlements. For the New York Teamsters, the Court offered the alternative of a revised settlement at $270.8 million or a scheduling order to resolve remaining factual and legal issues. For Locals 617 and 1730, the Court offered the alternative of settlement at the five-step methodology amounts or prompt briefing on a § 502(c) estimation motion.

The case continues before the United States Bankruptcy Court for the District of Delaware, Case No. 23-11069 (CTG), before Judge Craig T. Goldblatt.

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Company Background and Business Operations

Bravo Brio Restaurants, LLC operates restaurants nationwide under two brand names: Brio Italian Grille and Bravo! Italian Kitchen. The company acquired its assets in 2020 through a Section 363 sale in the Chapter 11 bankruptcy of FoodFirst Global Restaurants, Inc. In that transaction, senior lender GPEE Lender, LLC prevailed at auction via credit bid and assigned the sale rights to the company, which assumed $23 million in GPEE senior secured debt.

The company is the sole owner of six subsidiary entities, each functioning as a special purpose vehicle associated with a particular restaurant location. Each subsidiary holds the lease, liquor license, and furniture, fixtures, and equipment interests for its respective restaurant. Four of the six subsidiaries are debtors in the jointly administered cases.

On the petition date of August 25, 2025, the debtors operated 48 restaurants and employed approximately 4,000 individuals. By the time of the confirmation trial in January 2026, operations had been reduced to 43 restaurants with approximately 3,000 employees.

The inKind Relationship and the Credit Purchase Agreement

The central dispute in the case involves a Credit Purchase Agreement between the company and inKind, a restaurant financing company that purchases credit from restaurant operators at a substantial discount and resells it to consumers through a smartphone application at close to face value.

In July 2023, the company and inKind entered into the Credit Purchase Agreement, under which inKind purchased $5 million in credit for $2.5 million. The agreement was later amended to add another $2 million in credit for $1 million, bringing the total to $7 million in credit acquired by inKind for $3.5 million. The company's subsidiaries were not parties to the agreement.

A critical feature of the agreement required the company to honor credit sold by three "Sister Merchants," identified as Buca, LLC, PB Restaurants, LLC, and OCS Restaurant Holdings, LLC, without receiving any additional compensation. The agreement did not specify the amount of credit purchased from the Sister Merchants and did not limit the company's responsibility to honor that credit. The agreement was governed by Delaware law.

The agreement contained several provisions that became central to the court's analysis. Upon an event of default, liquidated damages would be calculated at $0.65 times the amount of "purchased Credit" not yet sold or redeemed. A Limitation of Liability provision capped the company's aggregate liability at $5 million, an amount equal to the initial credit purchase. Notably, this cap was not modified when the agreement was amended to include additional credit.

Rejection and the Path to Confirmation

On September 5, 2025, the debtors filed a motion to reject the inKind agreement, arguing it was burdensome because the company was honoring approximately $75,000 per week in credit without receiving revenue from those sales. inKind objected, contending that the agreement was not an executory contract but a security agreement. The court granted rejection on October 30, 2025, finding the agreement executory under the Countryman definition and ruling that rejection was a proper exercise of business judgment.

Following rejection, inKind filed 15 total proofs of claim (three identical claims in each of the five bankruptcy cases), each seeking $11,932,899 and asserting a security interest in the debtors' assets.

Estimation of inKind's Claims at Zero

The court's contract interpretation analysis, applying established principles of Delaware law, proved decisive. The opinion concluded that the parties intended upon default that the company would only be responsible for damages based on unredeemed credit it sold to inKind, not credit sold by the Sister Merchants.

The court reached this conclusion by examining several provisions of the agreement as a whole. Liquidated damages were calculated on "purchased Credit" not yet sold or redeemed. Because "purchased" modifies "Credit," the court found it referred to something less than the general term "Credit" used elsewhere to describe what the company must redeem. The default provisions made no reference to credit sold by Sister Merchants, and the agreement contained no cross-default or cross-collateralization language tying the company's liability to the Sister Merchants' obligations. The limitation of liability, capped at $5 million (equal to the initial credit purchase amount), further supported this interpretation.

The unrebutted testimony at trial established that over $7 million in credit had been redeemed at the debtors' restaurants, with the company's general counsel testifying that $8 million had been redeemed, exceeding the $7 million in credits sold by the company to inKind. inKind did not dispute these calculations and introduced no evidence regarding unredeemed credit specific to the company as opposed to Sister Merchant credit.

The court estimated inKind's claims at $0 for all purposes under Section 502(c) and Bankruptcy Rule 3018, sustained the debtors' omnibus objection, disallowed all 15 proofs of claim in their entirety, and ordered the release of any liens held by inKind on the debtors' assets. The court also noted in a footnote that if it were necessary to address whether inKind held a security interest, it would conclude that inKind did not: the debtor subsidiaries did not execute the agreement, and as to the parent company, inKind's interest would be junior to GPEE with no remaining value for inKind's lien to attach.

Disclosure Statement Approval

inKind's challenge to the Disclosure Statement centered on the fact that the solicitation package it received via U.S. mail did not include the Disclosure Statement. The court found this deficiency harmless. inKind's counsel received the Disclosure Statement electronically via the court's CM/ECF system on December 9, 2025, three days before the solicitation package was mailed. The court noted that under the local rules of the Middle District of Florida, registration as an Electronic Filing User constitutes a waiver of the right to receive service by first-class mail. inKind's pleadings and arguments at trial demonstrated that it fully understood the terms of the plan, and no other creditors raised concerns about not receiving the Disclosure Statement.

The court found the Disclosure Statement contained adequate information, noting that it specified what allowed general unsecured claims would receive (a pro rata distribution of $750,000), when they would receive it (on the effective date), and all contingencies to receiving the distribution.

The Confirmed Plan of Reorganization

The confirmed Second Modified Plan of Reorganization provides for the continued operation of all debtor entities. Upon confirmation, Champion will fund an additional $4.5 million into GPEE (having already funded $3.5 million into GPEE during the case to finance a DIP loan). Post-confirmation, R&R Brands, a Champion affiliate, will oversee day-to-day operations.

The plan has ten classes: one priority claims class, seven secured claims classes, one unsecured claims class, and one equity interests class. All classes are impaired. Allowed general unsecured creditors in Class 9 will receive a pro rata distribution of $750,000 from the sale of a liquor license at the company's Freehold, New Jersey restaurant. Equity interests will vest in GPEE or its designee on the effective date.

Creditor support was overwhelming. All classes other than inKind voted to accept the plan, with claims totaling over $32 million. In Class 9, 17 creditors cast ballots in favor of the plan.

Confirmation Requirements

The court systematically addressed each of the confirmation requirements challenged by inKind.

On good faith under Section 1129(a)(3), the court found no abuse of the judicial process, characterizing the failure to mail the Disclosure Statement to inKind as harmless error.

On the best interests test under Section 1129(a)(7), the debtors' liquidation analysis demonstrated that unsecured creditors would receive nothing in a Chapter 7 liquidation, compared to a pro rata share of $750,000 under the plan. inKind failed to specify which individual debtor estates would have assets available for unsecured creditors or to identify flaws in the liquidation analysis.

On the impaired accepting class requirement of Section 1129(a)(10), the court acknowledged a split of authority on whether the requirement applies on a per-plan or per-debtor basis but found it satisfied under either approach. The court distinguished a prior Middle District of Florida decision that had applied a per-debtor analysis, noting that class gerrymandering was present in that case but not here.

On feasibility under Section 1129(a)(11), the court credited testimony regarding the $4.5 million capital infusion, 2026 projections indicating $11 million available to cover plan payments, and the expected sale of the liquor license within three to six months. inKind presented no evidence to contradict this testimony.

Because inKind's claim was estimated at $0, the court found the plan did not impair inKind, all classes accepted the plan, and Section 1129(a)(8) was satisfied without need for a cramdown analysis under Section 1129(b).

Key Dates

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 24 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

Power Block Coin, L.L.C., operating under the trade name SmartFi, is a Utah limited liability company that provided crypto-based financial services including cryptocurrency exchange, savings, crypto-based lending, token creation and offering, alternative currencies, and cryptocurrency investment. The company had no employees of its own. All work was performed by employees of its parent company, Blue Castle Holdings, Inc., under a pre-petition Management Services Agreement that the Court subsequently approved. Under that agreement, Blue Castle used funds from its own bank accounts to pay the Debtor's obligations, and the Debtor either transferred cryptocurrency to Blue Castle or applied credits against a $1.4 million loan it had made to Blue Castle in August 2023.

The Debtor has ceased operations. Beginning in 2022, worldwide cryptocurrency markets experienced a rapid collapse and sustained period of instability, which contributed to the company's financial deterioration.

Path to Bankruptcy and Case History

The case has been pending for approximately 21 months since the petition date, and the Court characterized it as having been "fraught with issues" throughout. The Debtor initially elected to proceed under Subchapter V of Chapter 11 despite facing claims in excess of $192 million. Almost four months later, the Court sustained objections to that election, rendering the case a traditional Chapter 11 proceeding and leading to the appointment of the Official Committee of Unsecured Creditors.

The Committee's investigation uncovered a series of concerns about the Debtor's management of the estate. The Debtor's monthly operating reports failed to adequately account for changes in the Blue Castle loan balance and the value of its cryptocurrency holdings, and contained entries the Debtor could not adequately explain at a hearing on a motion to compel accounting. The Committee alleged that the Debtor's assets had been commingled with those of Blue Castle and its affiliates to the point of incomprehensibility, that the Debtor diverted the bulk of its assets through unsecured loans to affiliates under the principal's common control at favorable rates with no payments due for years, and that the Debtor failed to preserve its rights in a property on which a $2 million post-petition lien was placed. Monthly operating reports also revealed payments from undisclosed bank accounts, and the U.S. Trustee identified unaccounted-for checks related to a theft recovery.

Plan negotiations proved equally difficult. The Court denied the Debtor's motion to extend its exclusivity period in December 2024, noting the Debtor had not demonstrated the ability to operate with transparency and good faith. The Debtor filed its First Amended Plan of Reorganization on December 16, 2024, and the Committee filed its own plan on January 30, 2025, followed by an amended version on March 7, 2025. Negotiations with the then-largest creditor, Celsius, for a term sheet were unsuccessful, and a subsequent mediation among the Debtor, Blue Castle, the Committee, and other Debtor affiliates reached tentative agreement on some issues but ultimately ended in impasse.

Competing Motions: Trustee Appointment vs. Conversion

The Committee filed its Motion to Appoint a Chapter 11 Trustee on October 21, 2025. A creditor and the U.S. Trustee initially joined in support, though the U.S. Trustee later adopted a neutral position after the Debtor filed its own motion to convert to Chapter 7. Two additional creditors also supported the Chapter 11 Trustee appointment.

The Debtor, for its part, conceded that plan confirmation was no longer feasible due to increasing administrative fees and the inability to reach agreement with the Committee. The Debtor stated it no longer wished to remain in possession and did not challenge the Committee's allegations, recognizing that placement of an independent trustee was in the best interests of creditors. The Debtor did, however, acknowledge that Chapter 7 would produce a worse outcome than the terms previously negotiated among the Committee, Celsius, and the affiliates under the Committee's joint plan proposal.

Four creditors and investors, including one Committee member, joined the Debtor in seeking conversion to Chapter 7 after the hearing.

The Court's Analysis

The Court framed the central question as which form of trustee oversight would best serve creditors, noting that both sides agreed the Debtor should no longer control the estate. The legal standards under Sections 1104(a)(2) and 1112(a) and (f) converge on a single criterion: what is in the best interests of creditors.

On the conversion question, the Court applied the framework established by the Tenth Circuit Bankruptcy Appellate Panel in Kearney, which holds that if a court would immediately reconvert a case back to Chapter 11 under Section 706(b), it need not go through the "procedural anomaly" of converting in the first instance. The Court concluded it would do exactly that, and therefore denied conversion under Section 1112(f).

Three factors drove the Court's decision to keep the case in Chapter 11 with a trustee rather than convert to Chapter 7.

First, the Court found that conversion would cause unnecessary and potentially harmful delay. The Committee has spent significant time and energy investigating the Debtor and still needs additional information. A Chapter 7 Trustee would need to learn the case from scratch without the Committee's assistance, as the Committee would be disbanded in Chapter 7. With statutes of limitation on potential avoidance actions approaching, the estate cannot afford additional delay. The Tenth Circuit has held that the limitations clock does not reset upon appointment of a subsequent trustee, making any time lost to transition a real and permanent risk to the estate.

Second, Chapter 11 offers expanded flexibility for a trustee to exercise independent judgment and direct the affairs of the estate to optimize recovery. The Committee intends to work with the appointed trustee to confirm the Committee's pending plan, preserving the institutional knowledge the Committee and its professionals have developed over the life of the case.

Third, the Committee represented that it and its professionals would manage administrative fees to permit a Chapter 11 Trustee to recover value for the estate. The Committee has agreed to defer fees so they are not due on the effective date of the plan, and both trustee candidates the Committee interviewed have agreed to work on a contingency basis. The Committee asserts sufficient assets exist to fund the case, including cryptocurrency inventory, amounts owed under the Blue Castle loan, and potential claim settlements.

The Court also considered and rejected the Committee's argument that a Chapter 11 Trustee would be better insulated from the in pari delicto defense than a Chapter 7 Trustee. The Court found this factor not determinative, concluding that the defense's applicability depends more on the nature of the claims brought than on who brings them.

The Court described the decision as "a close one" but concluded that remaining in Chapter 11 offers material benefits to creditors compared to conversion.

Disclosure Statement and Next Steps

The Court placed the pending disclosure statement on hold pending the Chapter 11 Trustee's appointment and review, finding it would be a waste of resources to advance the disclosure statement process without the incoming trustee's approval. The Court noted concerns about whether the disclosure statement contains sufficient information regarding assets available to pay creditors relative to anticipated administrative fees.

If the appointed Trustee wishes to move the disclosure statement forward in a substantially similar form, the Court indicated it will entertain requests for expedited consideration. The Court also acknowledged that if the Debtor is correct that insufficient assets exist to pay administrative fees and confirm a plan, a trustee working on a contingency basis would be positioned to inform the Court if liquidation through Chapter 7 is ultimately the better course.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 24 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

The five Debtor entities were formed as Florida entities in 2017 by two co-founders who have exercised managerial control over each entity since inception. The Debtors were organized to acquire, manage, renovate, and operate real property, consisting primarily of single-family residential properties and vacant lots located in Florida, Pennsylvania, Texas, and New Jersey.

Each Debtor filed a voluntary Chapter 11 petition on March 1, 2026, signed by the Chief Restructuring Officer. The petitions reflect estimated assets collectively between $500,001 and $100 million, with estimated liabilities in the same range. The Debtors' consolidated list of the 30 largest unsecured creditors indicates total unsecured debt well in excess of $9 million.

The cases have carried several markers of complexity from the outset. A notice of deficient filing was issued the day after the petitions were filed, citing the Debtors' failure to file schedules of assets, financial affairs statements, and other required documents. The Debtors subsequently sought additional time to compile that information with the assistance of the Chief Restructuring Officer, counsel, and proposed professionals. According to filings in the case, the Debtors have been the subject of lawsuits by investors as well as investigations by the Securities and Exchange Commission and the Florida Attorney General. No committee of unsecured creditors and no Chapter 11 trustee had been appointed as of the date the examiner motion was filed.

The Order Appointing an Examiner

On April 1, 2026, the Court granted the United States Trustee's unopposed motion to appoint a Chapter 11 examiner (Dkt. No. 167). The Debtors had consented to the appointment, and the Court entered the order without a hearing.

The order directs the examiner to conduct the investigation specified in Bankruptcy Code sections 1106(a)(3) and (4), which encompass the Debtors' acts, conduct, assets, liabilities, financial condition, business operations, and the desirability of continuing the business. The investigation specifically includes any allegations of fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity by former management, as well as whether the estate may hold causes of action based on any such conduct.

Scope of the Investigation

Beyond the statutory mandate, the order identifies four specific areas of inquiry that define the contours of the examination.

First, the examiner is directed to trace cash inflows and outflows between investors and lenders on one hand and the Debtors on the other, including money raised by the Debtors but deposited or sent to non-Debtor entities. The examiner is also tasked with determining, to the extent ascertainable, whether those payments should be characterized as debt or equity.

Second, the order requires analysis of "rollover" investments: whether they should be valued, at what valuation, and how they should be characterized.

Third, the examiner must perform a comprehensive accounting reconciliation of the utilization and transfers of the Debtors' assets and cash for the four-year period prior to the petition date. This includes money raised by the Debtors but deposited or sent to non-Debtor entities, as well as the connections and transfers among the Debtors and non-debtor entities including directors, officers, insiders, and affiliates.

Fourth, the investigation covers the origination and receipt of investments in Inner Circle memberships, REIT interests, joint ventures, and hard money loans from investors, along with any repayment of those investments.

The breadth of these topics reflects the complexity of the Debtors' capital structure and the nature of the concerns raised by investors and government agencies. The four-year lookback period, combined with the directive to trace funds flowing to non-Debtor entities and to examine the debt-versus-equity characterization of investor payments, signals that the examination will probe the fundamental question of how investor capital was raised, deployed, and accounted for across the enterprise.

Selection of the Examiner

The Acting United States Trustee appointed Maria M. Yip as examiner on April 2, 2026, and filed an application seeking court approval of that appointment (Dkt. No. 176). Yip is affiliated with Yip Associates, a firm based at 9200 S. Dadeland Boulevard in Miami.

The United States Trustee solicited nominations for examiner candidates from three parties in interest: Debtors' bankruptcy counsel, the Securities and Exchange Commission, and the Florida Office of the Attorney General. The involvement of both the SEC and the state Attorney General in the nomination process underscores the regulatory dimension of these cases.

In a verified statement filed alongside the application (Dkt. No. 176-1), Yip certified under penalty of perjury that she has no connections with the Debtors, creditors, other parties in interest, their attorneys and accountants, the United States Trustee, or any person employed in the Office of the United States Trustee. The verified statement does disclose one matter: an employee of Yip Associates was previously employed at Kaufman Rossin, a firm that had been retained by the SEC to perform work related to the Debtors. That employee worked on the SEC engagement. To address this prior relationship, an informational barrier will be implemented to restrict the employee's access to physical and electronic documents and information that the examiner and Yip Associates will receive or create in connection with the investigation.

Cooperation Obligations and Government Coordination

The order imposes cooperation obligations on a wide range of parties. The Debtors, their affiliates, managers, employees, directors, officers, subsidiaries, the Chief Restructuring Officer, and any unsecured creditors' committee (if one is later appointed) are all directed to cooperate with the examiner and provide all documents and information within their possession that the examiner deems relevant.

One of the order's more notable provisions is the directive requiring the examiner to coordinate with multiple government agencies. The examiner must cooperate fully with any federal, state, or local government agency currently investigating, or that may in the future investigate, the Debtors, their management, or their financial condition. The order specifies that the examiner is to promptly meet and confer with representatives of the Debtors, any unsecured creditors' committee, the Florida Attorney General, the SEC, the United States Trustee, and the United States Attorney for the Middle District of Florida to develop a work plan and coordinate the investigation. The inclusion of the U.S. Attorney's office in that list, alongside the SEC and the Florida Attorney General, suggests the potential for parallel government investigations beyond the bankruptcy proceeding.

If the parties cannot reach agreement on a work plan, coordination protocol, or proposed budget, the examiner must promptly report the impasse to the Court and submit recommendations for resolution.

Reporting Requirements and Confidentiality

The examiner's initial report to the Court is due within 60 days of the order approving the appointment. Beyond that initial filing, the examiner may file public reports on completed phases or progress of the investigation at the examiner's discretion.

Public disclosure is otherwise restricted. Neither the examiner nor the examiner's representatives may make public disclosures concerning the investigation except through court filings. Cooperation with governmental agencies is expressly excluded from the definition of public disclosure, preserving the examiner's ability to share information with regulators and law enforcement under protocols to be established.

The order also includes robust privilege protections. Disclosure of documents or information to the examiner does not constitute a waiver of work-product, attorney-client, or other privilege. Disputes over privileged documents may be brought before the Court for resolution. The examiner is required to cooperate with the Debtors and any creditors' committee to ensure that publicly filed reports do not contain privileged information, including information regarding the Debtors' prospects or litigation strategies.

Reservation of Rights

The order explicitly preserves the right of any party in interest to seek an expansion of the investigation's scope, to request the appointment of a Chapter 11 trustee, or to seek any other lawful relief. Any party objecting to the examiner appointment was required to file an objection within seven days of the order's entry.

Case Information

The cases are jointly administered before the United States Bankruptcy Court for the Middle District of Florida, Tampa Division, under Lead Case No. 8:26-bk-01636-CPM. The Debtors are represented by Pack Law of Coral Gables, Florida. The examiner motion was filed by the Office of the United States Trustee for Region 21.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of approximately 15 pages of court filings in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Background: The Company and the Receivership

Uncle Nearest, Inc. is an American whiskey company with products available in all 50 states and 12 countries, with a presence in more than 50,000 stores, bars, hotels, and restaurants, according to a press release filed as an exhibit in the case. The company's Nearest Green Distillery in Shelbyville, Tennessee welcomes approximately 200,000 visitors annually.

On July 28, 2025, Farm Credit Mid-America, PCA filed a verified complaint and request for appointment of a receiver against the Uncle Nearest entities and two individual defendants in the United States District Court for the Eastern District of Tennessee, seeking to recover more than $108 million in outstanding loans and to preserve collateral securing those loans. On August 22, 2025, District Judge Charles E. Atchley entered an Order Appointing Receiver, designating a restructuring attorney from Thompson Burton PLLC to serve as receiver over Uncle Nearest, Inc., Nearest Green Distillery, Inc., and Uncle Nearest Real Estate Holdings, LLC.

The Receivership Order granted broad authority to the receiver. Paragraph 9 provided that the receiver would be "exclusively vested" with all the powers of officers, directors, members, and managers of the entities. Paragraph 10(q) specifically authorized the receiver to commence proceedings under title 11 of the United States Code on behalf of the entities. The order also enjoined all officers, directors, employees, and agents from interfering with the receiver's actions. The only carve-out permitted the company's founders to continue marketing products and managing the brand, subject to the receiver's supervision.

In December 2025, the District Court struck filings that had been made on behalf of the entities without the receiver's authorization, ruling that only the receiver could represent the companies' interests in the pending litigation.

The Bankruptcy Filing and Response

On March 17, 2026, the company's chief executive officer signed and filed voluntary Chapter 11 petitions for all three entities in the Bankruptcy Court for the Eastern District of Tennessee. A press release issued simultaneously through the company's holding entity announced that the filing had brought the receivership to an end and that the company would pursue claims and counterclaims against its lender through the bankruptcy process. The press release stated that unsecured obligations totaled approximately $13.2 million, that the outstanding principal balance owed to Farm Credit was approximately $102.5 million, and that the company's enterprise assets were estimated at approximately $529 million.

The receiver contacted the debtors' bankruptcy counsel, forwarded the Receivership Order, and requested that the petitions be withdrawn. Counsel for the debtors responded with awareness of the receivership order but declined to withdraw the petitions, contending that the order authorized the receiver to file bankruptcy but did not make that authority exclusive or prohibit the debtors from filing.

The Receiver's Motion to Dismiss

On March 18, 2026, the receiver filed an expedited motion to dismiss the bankruptcy cases or, in the alternative, to be recognized as the exclusive authorized representative of the debtors. The motion advanced two primary arguments.

First, the receiver argued the court lacked subject matter jurisdiction because the petitions were filed by an individual without authority under applicable law to bind the entities. The receiver contended that the Receivership Order vested exclusive authority in the receiver through Paragraph 9's grant of all powers of officers, directors, members, and managers, and that Paragraph 10(q) specifically designated the receiver as the party authorized to file bankruptcy. The receiver further noted that the order's injunctive provisions explicitly prohibited officers and directors from interfering with the receiver's administration.

Second, the receiver argued dismissal was warranted for bad faith under 11 U.S.C. § 1112(b). Applying the Sixth Circuit's multi-factor totality-of-the-circumstances test, the receiver contended that the petitions were filed in violation of the District Court's injunction and represented an attempt to evade the receivership. The receiver noted that the chief executive officer had publicly announced that the filing ended the receivership. The receiver further disclosed that it was approximately four months into a marketing campaign for the sale of the entities as a going concern and that dismissal, rather than conversion to Chapter 7, would serve the best interests of creditors.

The Secured Lender's Motion to Dismiss

Farm Credit Mid-America filed its own motion to dismiss on March 19, 2026, raising similar arguments regarding lack of authority and bad faith, with additional factual assertions. The lender alleged that under the prior management of the company's founders, the entities had failed to file tax returns for at least five years, incurred excessive debt with no viable path to repayment, sold future revenues at a discount, operated at a cash flow deficit, lacked financial controls, and failed to maintain reliable financial records.

The lender's motion also alleged that the chief executive officer had diverted $20 million in proceeds from convertible promissory notes executed with an outside investor to a separate entity and had testified under oath that the transfer was made to prevent the lender from reaching those funds. The lender argued this conduct constituted fraud warranting appointment of a Chapter 11 trustee if the cases were not dismissed.

As alternative relief, the lender requested that the receiver be appointed as Chapter 11 trustee, citing the receiver's eight months of familiarity with operations and the need for continuity.

The Debtors' Opposition

The debtors filed their response in opposition to the receiver's motion on March 18, 2026, raising several counterarguments.

On the jurisdictional question, the debtors argued that the receiver conflated corporate authority with jurisdiction, contending that the filing of a bankruptcy petition invokes jurisdiction under 28 U.S.C. § 1334 and that disputes about filing authority are resolved within that jurisdiction rather than as a basis to defeat it.

On the authority question, the debtors relied on In re 530 Donelson, LLC, a 2024 decision from the Bankruptcy Court for the Middle District of Tennessee, arguing that a receivership does not divest bankruptcy authority unless the order contains clear language eliminating that right. The debtors contended that the Receivership Order only authorized the receiver to file bankruptcy but did not make that authority exclusive or expressly prohibit the debtors from filing. The debtors argued that courts distinguish between grants of authority and grants of exclusive authority, and that the absence of express prohibitory language was dispositive.

The debtors also raised federal preemption concerns, arguing that the right to seek bankruptcy relief arises under the Constitution's Bankruptcy Clause and that any attempt to restrict access to bankruptcy would conflict with federal law.

On the bad faith question, the debtors argued that they are operating businesses with ongoing operations and multiple stakeholders, not single-asset entities. They contended that the filing was made in good faith to preserve going-concern value after business performance deteriorated during the receivership period, and they submitted exhibit data showing declines in retail sales performance and distillery visitation following the receiver's appointment.

Business Performance Data

The debtors' opposition included NielsenIQ retail scan data and distillery visitor trend data as exhibits. The retail data showed that Uncle Nearest had outperformed the broader market by more than 31 percentage points in January 2025, with positive growth continuing through mid-2025. Following the receiver's appointment in late August 2025, the data showed sustained negative growth, with the brand underperforming the market by 18.3 percentage points by January 2026 and by 16 points by February 2026, a reversal of approximately 47 points from January 2025.

The distillery visitor data showed a similar pattern. During the pre-receivership period, combined merchandise and tour revenue grew at an aggregate rate of 9 percent, with tour and tasting attendance growing at 11 percent. Post-receivership, combined revenue declined 20 percent and attendance fell 22 percent. By early 2026, weekly merchandise revenue had declined as much as 90 percent and attendance had dropped as much as 89 percent compared to prior-year periods.

The Court's Ruling

The court held an expedited hearing on March 19, 2026, at which counsel for the debtors, the receiver, and Farm Credit presented oral argument. The parties agreed that there were no factual disputes and that the court needed only to interpret the Receivership Order in light of applicable law.

In its ruling, the court found that the Receivership Order left no doubt regarding who had authority to act on behalf of the debtors. The court determined that Paragraph 9's exclusive vesting of all powers of officers, directors, members, and managers in the receiver was the operative provision, and that Paragraph 10(q) — authorizing the receiver to commence bankruptcy proceedings — was simply a clarification that such exclusive authority included bankruptcy. The court found it immaterial that Paragraph 10(q) did not itself use the word "exclusive" because Paragraph 9 had already established exclusivity, with only a narrow carve-out for marketing duties under the receiver's supervision.

The court further noted that the Receivership Order expressly authorized only the receiver to take actions that must be authorized by a board of directors or members, including filing bankruptcy.

On the basis that the chief executive officer had no authority to file the petitions, the court granted both motions to dismiss in part. The order entered in the lead case, Uncle Nearest, Inc. (Case No. 3:26-bk-30470-SHB), dismissed that Chapter 11 case, and the court's reasoning applied equally to the two affiliated cases. The dismissal mooted all other matters that had been set for hearing.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of approximately 73 pages of court filings in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

BlockFills was founded in 2017 as a digital asset brokerage services company. The company focused solely on institutional, high-net-worth, and sophisticated customers and did not offer services to retail traders. Its suite of products included a proprietary trading platform, API connectivity, over-the-counter cryptocurrency trading, derivatives trading for eligible contract participants under the Commodity Exchange Act, collateralized lending, and cryptocurrency mining services.

The company utilized Fireblocks custody technology for digital asset management and maintained banking relationships with multiple domestic and international financial institutions for fiat settlement. BlockFills provided market access around the clock to a range of clients including hedge funds, broker-dealers, exchanges, crypto mining companies, and investment managers.

In May 2021, BlockFills raised approximately $7 million in a Pre-Series A equity round. In January 2022, the company closed a Series A round of approximately $36 million, proceeds from which were intended to be deployed into Bitcoin mining hardware. The Debtors' service address is 401 West Ontario St., Suite 400, Chicago, IL 60654.

The four Debtor entities are Reliz Technology Group Holdings Inc. (Delaware), Reliz Technologies LLC (Illinois), Reliz LTD (Cayman Islands), and Reliz CI LTD (Cayman Islands). The broader corporate structure includes numerous non-debtor subsidiaries spanning Brazil, Ireland, the United Kingdom, the UAE, Lithuania, Wyoming, and the Cayman Islands.

Events Leading to Bankruptcy

Loan Counterparty Defaults

From 2022 through 2025, BlockFills sustained losses from three failed lending relationships.

BlockFills provided net loans of 123 BTC, 500 ETH, and 5,000 USDC to one borrower, valued at approximately $8.5 million. That borrower filed for bankruptcy in Singapore on March 6, 2023 following exposure to other bankrupt counterparties, and the declaration states the loan would not be repaid.

BlockFills provided a separate 50 BTC loan to a bitcoin ATM company, valued at approximately $1 million at the time of the loan. The borrower defaulted on the obligation. BlockFills obtained a judgment of approximately $1.75 million, which remained unsatisfied as of the petition date. The declaration notes the value of the 50 BTC at the petition date was approximately $3.6 million.

BlockFills also participated in an equipment loan in partnership with a financing partner and equity shareholder to a cryptocurrency mining company backed by a multi-billion-dollar private equity firm. That borrower began missing required weekly payments in 2022 and subsequently filed for bankruptcy. Prior to filing, the borrower made approximately $3 million in payments to vendors and for director compensation, which the trustee for that bankruptcy is investigating for misappropriation. BlockFills settled a resulting dispute with its financing partner in late 2024 for approximately $12 million, weakening the company's balance sheet and liquidity.

Celsius Arbitration

BlockFills entered into a borrowing and lending arrangement with Celsius Network beginning in 2019, centered on a co-investment structure involving the Grayscale Ethereum Trust. A dispute over the settlement of that transaction led to arbitration in the United Kingdom. The four-day arbitration commenced on January 9, 2023. The arbitrator awarded Celsius the full amount of the initial ETH plus proceeds from the transaction, and the award was upheld on appeal in 2024. BlockFills subsequently negotiated a payment schedule through two promissory notes. The principal outstanding on those notes as of the petition date was approximately $4.8 million. The declaration states BlockFills had not made a payment on the notes since August 2025.

Mining Hardware Losses

Following the January 2022 Series A closing, BlockFills deployed capital into Bitcoin mining hardware intended to be placed at a third-party data site. The data site was not ready to operate when placement was intended, preventing BlockFills from activating its mining capabilities as planned. The declaration states BlockFills did not recoup its investment in the mining business line.

Crypto Market Crash and Withdrawal Suspension

On February 2, 2026, Bitcoin dropped below $80,000 for the first time since April 2025. BlockFills temporarily suspended certain deposit and withdrawal activity that day in response to liquidity pressure and customer withdrawal requests. On February 6, 2026, the company publicly announced a broader suspension of deposits and withdrawals, communicating with customers through written updates and video conferences.

Pre-Petition Litigation and Restraining Orders

In the weeks preceding the filing, two customer lawsuits were filed against certain Debtor entities and current or former directors and officers, alleging misappropriation of customer funds, conversion, breach of contract, and fraud-based claims. The first lawsuit was filed February 27, 2026 in the Southern District of New York. The second was filed March 5, 2026 in the Northern District of Illinois. The courts in both matters granted temporary restraining orders that restricted the Debtors' ability to conduct operations and exercise control over certain assets. The automatic stay afforded by Chapter 11 is intended to halt further litigation and prevent individual customers from pursuing assets outside the bankruptcy process.

Prepetition Restructuring Efforts

On July 23, 2025, BlockFills hired an Interim Chief Executive Officer. In August 2025, the company engaged Berkeley Research Group (BRG) to assist with restructuring and financial reporting, while also pursuing strategic alternatives, including a potential acquisition by a publicly traded cryptocurrency company. Those discussions commenced in September 2025 and included due diligence, in-person meetings, and negotiation of a go-forward business plan. The counterparty's board of directors declined to proceed in mid-November 2025.

Thereafter, BlockFills pursued a recapitalization with an existing investor combining new equity and debt financing. The parties made progress on the equity component in early January 2026, but feedback from potential debt providers indicated the debt component would be difficult to raise. The February 2026 withdrawal suspension materially altered the dynamics of those discussions, and the recapitalization was not completed.

From the period preceding the suspension through the petition date, BlockFills continued to evaluate alternatives with shareholders, advisors, and potential investors. The declaration states the board concluded that commencing Chapter 11 was the best available path to preserve value and pursue a court-supervised restructuring or sale process. On March 12, 2026, BlockFills formed a Special Committee comprised of a disinterested director, vested with authority to manage potential conflict matters, including investigating, releasing, or settling potential claims or causes of action.

Proposed Reorganization Plan

BlockFills has negotiated a term sheet with the Ad Hoc Group, which is comprised of the company's largest customers. The term sheet provides the framework for a Chapter 11 plan or a sale under Section 363 of the Bankruptcy Code. Certain terms remain subject to ongoing negotiation.

NewCo Structure

Under the term sheet, a newly formed entity (NewCo) will acquire certain assets of BlockFills, including current operating cash and digital assets, tangible assets, customer accounts and related data, the technology platform and intellectual property, brand assets, regulatory licenses to the extent transferable, and equity in certain affiliate entities. NewCo will not assume any pre-closing liabilities of BlockFills except as provided in definitive documentation. Participating customers will waive all claims against NewCo related to the business and conduct of BlockFills and its affiliates.

Customer Recoveries

Each customer with an allowed claim will receive a pro rata share of interests in a post-confirmation liquidating trust and a pro rata share of BlockFills' liquid assets. For the liquid portion, participating customers may elect to receive payment in digital assets and/or cash, full conversion into equity of NewCo, or a combination of the two.

Convenience Class

The term sheet proposes that customers with the lowest individual exposures to BlockFills — identified as approximately 807 customers — will constitute a Convenience Class and receive payments in cash or digital assets up to a proposed aggregate amount of $1,000,000. These figures appear in brackets in the term sheet, indicating they remain subject to ongoing negotiation. The Convenience Class is intended to reduce the administrative burden on the estates.

Liquidating Trust

Assets not transferred to NewCo — including estate causes of action not otherwise settled or released — will vest in a post-confirmation trust overseen by advisors selected by the Ad Hoc Group of BlockFills clients, for the pro rata benefit of customers.

New Money Investment

Until NewCo has raised $15 million in capital, participating customers may invest additional capital on a pro rata basis in exchange for equity at a valuation of the lower of $15 million or the amount raised. After that threshold is reached, existing customers may invest up to an additional $25 million at a valuation of up to $30 million.

Governance and Compliance

NewCo's initial board will consist of five to seven members, with representatives of participating customers comprising a majority. The board must include at least one independent member with recognized expertise in restructuring, financial services, or financial regulation. The board will appoint a Chief Compliance Officer responsible for anti-money laundering and know-your-customer functions. A management incentive plan is proposed with an incentive pool representing 10% to 15% of NewCo equity. All equity in NewCo shall be owned by no more than 500 entities, and all purchasers or recipients of equity must be accredited investors.

All customer funds held by NewCo will be maintained in segregated accounts separate from corporate funds. Customer assets may not be borrowed, pledged, hypothecated, or otherwise employed without the prior express written consent of those customers. All digital assets will be maintained with a qualified institutional custodian, and NewCo will implement daily reconciliation of customer balances and trading positions.

First Day Motions

The Debtors have filed or intend to file several first day motions seeking relief to facilitate administration of the Chapter 11 cases, including joint administration of the cases; appointment of Kurtzman Carson Consultants, LLC (d/b/a Verita Global) as claims and noticing agent; authorization to file a consolidated creditor matrix and redact certain personally identifiable information; authorization to serve certain parties by electronic mail and approve certain notice procedures; authority to pay certain prepetition taxes and fees; authorization to maintain existing insurance policies and pay related obligations; authorization for postpetition use of cash collateral with adequate protection to prepetition secured parties; and authorization to pay prepetition wages and employee benefit obligations. The Chief Restructuring Officer's declaration states that the first day relief requested is limited to matters requiring urgent action to preserve value during the pendency of the cases.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 32-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

The company reported revenue of approximately $724 million for fiscal year 2025 and carried approximately $1,533.9 million in total prepetition debt as of the petition date, with all debt instruments maturing by March 31, 2026. The company's chief financial officer submitted the declaration in support of the first day motions, providing the court with an account of the company's history, operations, financial condition, and proposed restructuring.

Company Background and Business Operations

The LYCRA Company traces its origins to 1958, when scientists at DuPont invented LYCRA® fiber, the original spandex (elastane) yarn. The fiber, which provides stretch and recovery properties, expanded from foundation garments and swimwear into hosiery, activewear, denim, and personal care products such as diapers and adult incontinence products. The company's products are sold to yarn processors and fabric mills, which incorporate the fibers into fabrics that are in turn supplied to garment manufacturers. The company does not itself manufacture apparel.

The company's brand portfolio comprises seven principal fiber lines: LYCRA® Spandex Fibers, LYCRA HyFit® Personal Care Fibers, LYCRA® T400® Stretch Fibers, COOLMAX® Performance Fibers, THERMOLITE® Insulation Fibers, ELASPAN® Elastomeric Fibers, and SUPPLEX® and TACTEL® Nylon Fibers. The company maintains and defends over 1,000 patents and applications comprising more than 100 unique patent families, along with approximately 2,400 trademarks protecting approximately 105 unique brands, marks, and logos.

The company operates approximately 2,000 employees across eight manufacturing facilities and eleven offices in North America, Europe, Asia, and South America. Manufacturing locations include facilities in Waynesboro, Virginia (321 employees); Monterrey, Mexico (345 employees); Paulina, Brazil (362 employees); Maydown, Northern Ireland (323 employees); Tuas, Singapore (a 90%-owned joint venture with 262 employees); Kerkrade, Netherlands (107 employees); Foshan, China (471 employees); Yinchuan, China (a 75%-owned joint venture with 292 employees); and 50%-owned joint ventures in Shiga, Japan and Taipei, Taiwan. Research and development is conducted at three labs located in Waynesboro, Virginia; Casaloldo, Italy; and Foshan, China.

In fiscal year 2025, the company recorded sales to customers in more than 80 countries. Approximately 57% of global sales were concentrated in four countries: China (29%), the United States (15%), Brazil (7%), and Italy (6%).

Corporate History and Ownership Transitions

In 2004, Koch Industries acquired DuPont's textiles and interiors business — including the LYCRA® spandex business — for approximately $4.4 billion, consolidating it under an entity called INVISTA. In January 2019, The LYCRA Company was acquired by Ruyi Textile and Fashion International Group Limited from Koch. In connection with that acquisition, the company incurred, among other obligations, a $400 million mezzanine financing arrangement.

In November 2019, nine months following the closing of the acquisition, the mezzanine borrower defaulted on the mezzanine financing. Negotiations between Ruyi and the mezzanine lenders continued through 2020 and 2021. In December 2021, the mezzanine lenders learned that Ruyi had allegedly transferred, or was about to transfer, certain of the company's Chinese assets — including onshore cash, plants, equipment, raw materials, and intellectual property — beyond the reach of creditors. Litigation in China arising from those alleged transfers remains ongoing across four separate proceedings.

In June 2022, the Netherlands Commercial Court approved a share pledge enforcement through which the mezzanine lenders took ownership of the company. In May 2023, the company executed a refinancing transaction that replaced earlier notes with new instruments, including a super senior term loan (originally $109 million, later upsized to $139 million) and new Euro Notes bearing interest at 16.000% per year, payable in kind. In January 2025, the post-enforcement shareholders entered into an agreement to sell the company to a Chinese state-owned enterprise, subject to conditions including regulatory approval by China's National Development and Reform Commission and the purchaser obtaining sufficient acquisition financing. By August 2025, it became apparent that the proposed sale would not be consummated, and on September 5, 2025, a further change of control occurred whereby ownership of the company was transferred to Eagle Holding Co B.V., a newly incorporated entity. The equity interests in Eagle Holding are held in trust by GLAS Trustees Limited for the benefit of the company's creditors.

Prepetition Capital Structure

As of the petition date, the company's funded debt consisted of four instruments, all sharing a March 31, 2026 maturity date. The prepetition secured debt is secured by substantially all of the debtors' assets and governed by an intercreditor agreement under English law. The agreed enforcement waterfall provides for repayment of the super senior term loan first, followed by the Euro Notes priority tranche, and then the Euro Notes non-priority tranche and Dollar Notes on a pari passu basis.

Events Leading to Bankruptcy

The company's financial condition deteriorated due to a combination of industry and company-specific pressures. Following disruptions caused by the COVID-19 pandemic, demand for apparel weakened, and the market saw capacity expansions by competitors, altering competitive dynamics. The company's manufacturing utilization rates declined from approximately 80% in mid-2024 to approximately 60% by the end of 2025. The declaration also cites intensifying competition from low-cost manufacturers, particularly in Asia, placing downward pressure on pricing; generic spandex prices fell to near cash-cost levels. In the personal care segment, the market for baby diapers softened and fragmented, with private-label products gaining market share.

The company's EBITDA declined from approximately $132 million in 2024 to a projected $44 million for 2026. The company also incurred costs in connection with managing its capital structure, including refinancing efforts and restructuring transactions.

An additional liability arose from a take-or-pay supply agreement entered into in July 2023 with HELM US Corporation for the purchase of QIRA, a bio-derived feedstock produced by Qore, LLC — a joint venture between Cargill, Incorporated and HELM — intended for use in producing bio-derived spandex fibers. The declaration states that production of QIRA was delayed beyond the originally anticipated start-up date, reducing any potential market advantage from early production of bio-derived spandex, and that broader industry conditions rendered the volume commitments in the agreement unsustainable. The company determined the agreement was not economically viable.

Beginning in December 2025, the company initiated discussions with HELM to restructure the supply agreement. Negotiations culminated in a settlement agreement and mutual release among the company, HELM, and Qore providing for termination of the supply agreement in exchange for a settlement payment of $4.75 million — including $750,000 in respect of existing payables owed to HELM — and a license agreement under which certain of the debtors granted HELM and Qore a non-exclusive license to certain patents related to QIRA. The declaration states that HELM has alleged potential rejection damages exceeding $100 million under the supply agreement.

The Restructuring Support Agreement and Prepackaged Plan

Following the failure of the proposed third-party sale, the company and its creditor groups continued negotiations. On January 9, 2026, the Euro Notes ad hoc committee delivered an Alternative Restructuring Notice under the existing lock-up agreement. On March 12, 2026, the Euro ad hoc group issued a notice of termination of the lock-up agreement, which terminated that date. On March 13, 2026, the company and the RSA parties entered into the RSA.

The RSA parties hold or have the power to direct more than two-thirds of the claims under each class of prepetition debt: 100% of the super senior term loan claims, 100% of the Euro Notes claims, more than 83% of the Dollar Notes claims, and more than 90% of the Promissory Note claims, in each case also representing more than 50% of the holders in that class.

The company commenced solicitation of votes on the prepackaged plan on March 16, 2026. Voting is scheduled to conclude on or about April 17, 2026. A hearing to approve the adequacy of the disclosure statement and confirm the plan is targeted for on or about April 24, 2026, and no later than 60 days after the petition date. Plan effectiveness and emergence from Chapter 11 is targeted within 75 days of the petition date, extendable to 90 days.

Treatment of Claims and Interests

DIP Financing

To fund operations during the case, the company secured a $75 million debtor-in-possession notes facility bearing interest at 9.00% per annum, payable in kind, and secured by substantially all of the debtors' assets with superpriority administrative claim status. The facility is structured in two tranches: $50 million available following entry of an interim DIP order, and an additional $25 million upon entry of a final DIP order.

Prior to filing, the company and its advisors contacted eleven potential third-party DIP lenders, two of which executed confidentiality agreements. No third party offered financing on terms acceptable to the company and its key stakeholders. The declaration states that without access to the DIP facility, the company projected a liquidity shortfall within the first week of the proceedings.

First Day Relief Requested

Contemporaneously with the petition, the company filed first day motions seeking authority to: pay prepetition wages, salaries, and employee benefits for approximately 2,000 employees, totaling approximately $24 million; maintain and pay insurance, surety bonds, and letters of credit; continue existing customer programs including discounts, rebates, and refunds; pay all trade claims in the ordinary course; continue its existing cash management system and intercompany transactions; remit and pay taxes and fees; provide adequate assurance for utility services through a proposed deposit of $290,945.47, representing approximately 50% of average monthly utility payments over the preceding twelve months; enforce the worldwide automatic stay; and obtain joint administration of the 26 debtor entities.

The company's corporate structure at the time of filing includes 43 entities, 26 of which are debtors in the prepackaged cases, incorporated across Brazil, China, Germany, Hong Kong, India, Italy, Japan, Jersey, Mexico, the Netherlands, Singapore, South Korea, Spain, Switzerland, Taiwan, Turkey, the United Kingdom, and the United States.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 189 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

The motion, filed March 18, 2026, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, under Case No. 26-90126 (ARP), follows the company's voluntary Chapter 11 filing on January 26, 2026. The financing would be provided by certain members of an ad hoc group of the company's existing prepetition noteholders, which holds approximately 78.8% of outstanding prepetition notes, after a marketing process that solicited proposals from 31 potential lenders produced no third-party term sheets.

Company Background and Business Operations

FAT Brands Inc. and its subsidiary, Twin Hospitality Group Inc., together comprise a multi-brand restaurant company that develops, markets, acquires, and manages quick-service, fast casual, casual dining, and polished casual dining restaurant concepts around the world. As of the petition date, the company had approximately 7,500 direct full-time and part-time employees, eighteen restaurant brands, and approximately 2,200 locations open or under construction, including more than 150 company-owned restaurants and more than 1,900 franchised locations. The motion states the company is one of the largest restaurant companies in the United States by number of locations.

Events Leading to the DIP Financing Motion

The debtors entered their Chapter 11 cases in what the motion describes as an extremely fragile liquidity position and with no committed debtor-in-possession financing. Since the petition date, the debtors have sustained operations through the use of cash collateral. The motion states that while the debtors continue to generate cash revenues from operations, the significant administrative costs of the Chapter 11 cases cannot be funded solely from cash on hand, and that access to incremental liquidity through DIP financing is required.

An official committee of unsecured creditors was appointed by the Office of the United States Trustee for the Southern District of Texas on February 6, 2026.

Governance Agreement

Prior to the filing of the DIP motion, the debtors participated in a mediation with the WBS Ad Hoc Group and the official committee of unsecured creditors. On March 11, 2026, the mediator—a sitting United States bankruptcy judge—delivered a final proposal to resolve disputes over the debtors' governance structure, and the mediation parties reached a settlement reflected in the Governance Agreement.

The resulting Governance Agreement, filed concurrently with the DIP motion on an emergency basis, restructured management authority at the debtor entities. Under its terms: (a) the DIP lenders will pay $5 million to the FBG Manager in installments, which amount will be paid to the chief executive officer on the terms set forth in the Governance Agreement; (b) sole and exclusive authority to manage the affairs of the debtors will vest in the Special Committee; (c) the chief executive officer will take a temporary leave of absence until the later of the closing of a sale of the debtors' assets or consummation of a confirmed chapter 11 plan; (d) the employment of the chief executive officer's family members who are employed by the debtors will be terminated; and (e) the existing members (other than the Special Committee directors) of the DIP Loan Parties' boards of directors will resign. The motion states the Governance Agreement was a precondition to the DIP Facility.

Structure of the DIP Financing Facility

The proposed DIP Facility consists of two parallel components:

FBG DIP Facility: FAT Brands Royalty I, LLC, FAT Brands Fazoli's Native I, LLC, and FAT Brands GFG Royalty I, LLC serve as borrowers, with FAT Brands Inc. and each wholly-owned domestic subsidiary acting as guarantors. The facility provides up to $46.0 million in new money term loans, structured across three draws: an initial draw of $29.0 million available upon entry of the proposed interim order; a second draw of $1.0 million available upon entry of the final order and bidding procedures order; and a third draw of up to $16.0 million available at the bid deadline if available cash falls below $5.0 million in the aggregate across all DIP Loan Parties. Each dollar of new money drawn triggers a 3:1 roll-up of existing prepetition Class A-2 note obligations held by the DIP lenders, resulting in up to $138.0 million in rolled-up prepetition debt converting to DIP loans.

Twin DIP Facility: Twin Hospitality I, LLC serves as borrower, with FAT Brands Inc., Twin Hospitality Group Inc., and all wholly-owned domestic subsidiaries providing guarantees. This facility provides up to $30.9 million in new money, structured across three draws: $19.0 million at interim order entry; $1.0 million at final order entry; and up to $10.9 million at the bid deadline subject to the same liquidity threshold. The 3:1 roll-up mechanism applies to existing Twin prepetition notes (Class A-2-I and Class A-2-II), converting up to $92.7 million of prepetition obligations into DIP loans.

In both facilities, UMB Bank, N.A. serves as administrative and collateral agent. The combined facilities provide up to $76.9 million in new money and approximately $307.6 million in total principal when rolled-up prepetition debt is included. All DIP loans bear interest at 12.00% per annum, increasing to 14.00% per annum upon an event of default. The DIP loans mature on May 8, 2026, subject to earlier maturity upon specified termination events.

Marketing Process and Lender Selection

Prior to the petition date, the debtors, with the assistance of their investment banker, GLC Advisors & Co., LLC, solicited DIP financing proposals from 31 potential lenders, including both third parties and existing stakeholders. No third party or other prepetition creditor submitted a term sheet to provide a DIP financing proposal to the DIP Loan Parties as a whole. The motion further notes that the existing prepetition noteholders were unwilling to permit a third party to prime their prepetition liens, which would have required a contested priming proceeding. The debtors concluded that the terms offered by the WBS Ad Hoc Group represent the best available financing option. The DIP Facility is fully backstopped by certain members of the WBS Ad Hoc Group.

Sale Process and Case Milestones

The DIP Facility is structured to support a sale of substantially all of the debtors' assets under Section 363 of the Bankruptcy Code, which may be consummated through a series of sales. The financing agreement contains binding case milestones. Failure to meet milestones constitutes a termination event and may trigger acceleration of all outstanding amounts. The agreed timeline is as follows:

Adequate Protection

As adequate protection for the interests of the prepetition secured parties in the prepetition collateral, including cash collateral, from and after the petition date, the prepetition secured parties are to receive: (a) replacement liens on all DIP collateral to the extent of any diminution in value of the prepetition secured parties' interests; (b) superpriority administrative expense claims under Section 507(b) of the Bankruptcy Code; (c) payment of the reasonable and documented out-of-pocket fees, costs, and expenses of counsel to the prepetition trustees and counsel and financial advisor to the WBS Ad Hoc Group; and (d) ongoing access to budget and variance reporting and other information required to be delivered under the DIP documents.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 279-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

The United States Bankruptcy Court for the Eastern District of Louisiana ruled on March 10, 2026, that a group of 81 abuse survivors — identified as "Certain Abuse Survivors" — lack standing under Section 1109(b) of the Bankruptcy Code to object to pending and future attorneys' fee applications filed by estate professionals. The ruling, issued in Case No. 20-10846, turns on the structure of the $230 million Settlement Trust created under the Archdiocese's confirmed joint plan of reorganization.

Case Background

The Archdiocese filed a voluntary Chapter 11 petition on May 1, 2020. At the time of filing, there were over thirty pending lawsuits filed in Louisiana state court between 2018 and 2020 by individuals alleging claims of past sexual abuse by priests employed or supervised by the Archdiocese. The case was designated as "complex" under the court's Procedures for Complex Chapter 11 Cases. An Official Committee of Unsecured Creditors was constituted on May 20, 2020, with membership consisting entirely of sexual abuse claimants.

Professional fees incurred throughout the case were subject to the court's complex case procedures, which required monthly invoicing and periodic interim fee applications subject to court review and approval.

The Fee Disputes

Beginning in April 2024, Certain Abuse Survivors filed objections to a series of interim fee applications. Hearings on these contested applications were repeatedly continued, first as the parties pursued mediation and then as the case moved toward plan confirmation. The court stayed discovery on the fee disputes and related motions to allow the parties to focus on negotiating a confirmable reorganization plan.

Separately, the court appointed an independent expert under Federal Rule of Evidence 706 to assess the status of the case and the debtor's ability to move forward in Chapter 11. The expert published his report and recommendations on October 23, 2024. Following two status conferences with parties in interest regarding the report's contents, the court entered orders setting an expedited discovery schedule and additional status conferences directed toward plan negotiation.

Plan Confirmation and the Settlement Trust

After years of negotiations and mediation, the Archdiocese, the Committee, and 157 affiliated Additional Debtors — which filed their own bankruptcy cases on or about November 12, 2025 — confirmed a joint plan of reorganization. The plan proponents had filed a Memorandum of Understanding identifying the terms of a joint reorganization on May 21, 2025. In late September 2025, the Archdiocese and Certain Abuse Survivors announced a settlement of the survivors' objections to the proposed joint plan; the survivors subsequently withdrew their motion to dismiss and stated on the record that they fully supported confirmation. On December 8, 2025, the court entered an order confirming the joint plan, which became effective December 26, 2025. The Confirmation Order is final and unappealable.

The confirmed plan established a $230 million Settlement Trust for the sole benefit of abuse claimants. That trust was funded through three components: $130 million in cash from the Archdiocese and the Additional Debtors, two promissory notes totaling $70 million guaranteed by the Debtor and Additional Debtors and to be satisfied from proceeds of pending affordable housing facility sales, and approximately $30 million in cash from settling insurers. The Settlement Trust also received all rights to insurance proceeds or causes of action against non-settling insurers. Of 491 claimants holding Known Abuse Claims who voted in Class 3, 489 — or 99.59% — accepted the plan.

The plan employs a "pot plan" structure: the Archdiocese and Additional Debtors contributed a fixed, agreed-upon sum to the Settlement Trust, to be distributed pro rata among abuse claimants in Classes 3 and 4 regardless of the total number or amount of claims filed and allowed. The plan expressly states that abuse claimants' monetary recovery is limited exclusively to the Settlement Trust, and no "waterfall" provision exists that would redirect any reduction in professional fees to the abuse claimant classes.

The Standing Ruling

At a December 18, 2025, hearing, certain professional services firms challenged Certain Abuse Survivors' standing to continue pressing their fee objections in the post-confirmation case. The court ordered briefing and heard oral arguments on January 22, 2026.

In its March 10, 2026 opinion, the court adopted the analysis from In re AIO US, Inc., 672 B.R. 261 (Bankr. D. Del. 2025), finding it unnecessary to inquire into the constitutional standing of Certain Abuse Survivors to object to fee applications, since they were not the parties invoking the court's federal jurisdiction. However, the court held that the survivors must qualify as "parties in interest" under Section 1109(b) of the Bankruptcy Code to appear and be heard, and that they no longer do.

The court found that the survivors lack a direct financial stake in the outcome of the fee disputes. Because the Settlement Trust amount is fixed at $230 million irrespective of how the court rules on professional fee applications, any reduction in attorneys' fees would not flow to abuse claimants. The Reorganized Debtor is obligated to pay each allowed professional fee claim in full, in cash, within fifteen days of allowance — independent of its obligation to pay other allowed professional fee claims.

The court distinguished two cases cited by the survivors. In In re AVC Villa Del Lago at Ocotillo Devco, L.L.C., the court had confirmed a creditor-sponsored plan in which the objecting creditor waived its own claim and injected cash to fund the plan, giving it a direct pecuniary stake in fee reductions. In In re Ridgeway, a prior Eastern District of Louisiana case, a judgment creditor's claim remained unresolved and unpaid at the time it objected to debtor's counsel's fees, and the plan would be funded primarily by the reorganized debtor's future cash flows — creating a direct financial interest tied to plan viability. Neither circumstance is present here.

The court also rejected the argument that the survivors' pending Substantial Contribution Claim under Sections 503(b)(3)(D) and (4) of the Bankruptcy Code conferred a pecuniary interest in other professionals' fees. Because the plan obligates the Reorganized Debtor to pay each allowed professional fee claim independently and in full, any reduction of the challenged fees would have no effect on the survivors' own potential substantial contribution award.

Court's Independent Review Authority

While overruling the fee objections for lack of standing, the court noted its independent duty to review all fee applications under Section 330 of the Bankruptcy Code, regardless of whether any party objects. The court stated that it has previously reduced requested fees on its own initiative during this case. An evidentiary hearing on all timely filed final fee applications — submitted on February 27, 2026 — has been scheduled for May 2026 to allow the court to review each application and evaluate the reasonableness of services rendered and expenses incurred.

The court expressly stated that nothing in its opinion rules on the merits of the survivors' pending Substantial Contribution Claim, which remains to be adjudicated.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 26-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

Razzoo’s opened its first location in Dallas, Texas in 1991, with the goal of filling a market need for Cajun culture and cuisine. The chain grew to six locations in Texas by 1996 and fourteen total locations by 2001, including the first out-of-state location in Concord, North Carolina. The company reached a peak of 24 locations across Texas, North Carolina, and Oklahoma. As of September 2025, the company operated 23 locations, following the closure of one underperforming location in 2024.

In 2024, the company reported total sales of $76.6 million, Store-Level EBITDA of $9.6 million, and Adjusted EBITDA of approximately $3.3 million. The Debtors did not own any real estate, operating each of their restaurant locations under long-term lease agreements with total monthly obligations of approximately $650,000.

Events Leading to the Chapter 11 Filing

The disclosure statement identifies three primary factors contributing to the company’s financial difficulties: deteriorating sales, burdensome lease obligations, and an inability to service secured debt.

The company experienced a decline in sales attributed to shifts in consumer spending habits, increased competitive pressure from other casual dining chains, and broader macroeconomic conditions including inflation and elevated interest rates. Competitors engaged in aggressive marketing and value-oriented promotions, which the disclosure statement notes negatively influenced guest traffic. Additionally, as a Cajun-focused concept, the company’s sales exhibited seasonal fluctuations tied to crawfish season, with 2025 results falling below prior-year levels despite the season beginning earlier.

The company’s lease obligations grew increasingly burdensome as sales volumes declined. In response, Razzoo’s conducted a store-by-store performance review and, in September 2025, closed locations in Pasadena, TX; Corpus Christi, TX; and Oklahoma City, OK — reducing monthly rent obligations by approximately $110,000 and leaving 20 locations in operation as of the petition date.

On the secured debt side, the company had entered into a credit agreement with First Horizon Bank in May 2022. The loan was amended multiple times, with the outstanding principal balance reaching approximately $9.65 million as of October 1, 2025 (the “Petition Date”). A principal and interest payment of approximately $500,000 was due to the bank on the Petition Date, which the Debtors determined they could not make while continuing normal operations.

Chapter 11 Case and Debtor-in-Possession Financing

Both Debtors filed voluntary Chapter 11 petitions on October 1, 2025. The company initially sought debtor-in-possession (DIP) financing from a third-party lender, TJF Financial, LLC, after First Horizon Bank declined to provide post-petition financing. At an emergency hearing on October 3, 2025, the parties agreed to continue negotiations, and First Horizon Bank subsequently agreed to serve as the DIP lender. The Bankruptcy Court entered the interim DIP order on October 7, 2025.

In October 2025, First Horizon Bank sold and assigned its entire position — including both the prepetition loan debt and DIP obligations — to ThirtyThree97 LLC pursuant to a Loan Sale Agreement dated October 21, 2025. ThirtyThree97 LLC thereby became the DIP lender. The final DIP order was entered on November 7, 2025. The DIP Facility consisted of $4 million in new money financing plus a roll-up of the prepetition loan debt, resulting in total DIP Loan Claims of approximately $14.04 million.

The Official Committee of Unsecured Creditors was appointed on October 14, 2025, comprising three members: My Tech Texas, LLC; South Loop Development, LLC; and Sabine 2016-1, LLC. The Committee retained Dykema Gossett PLLC as bankruptcy counsel.

Sale of Substantially All Assets

Consistent with DIP order milestones, the Debtors conducted a marketing and sale process under Section 363 of the Bankruptcy Code. On December 2, 2025, ThirtyThree97 LLC was designated as the stalking horse purchaser. No other qualified bids were received, and no auction was held. The Bankruptcy Court entered the sale order on December 23, 2025, and the sale closed on December 29, 2025, effective as of 12:01 a.m. on December 30, 2025.

Under the Asset Purchase Agreement, 11 restaurant locations were identified as “Continuing Restaurants” to be acquired by the buyer, while 9 locations were designated as “Excluded Restaurants.” The purchase was effected via a credit bid of the full DIP Loan Claims under Section 363(k) of the Bankruptcy Code, plus assumption of certain liabilities, with total consideration to the estates of approximately $18.8 million. As a result of the closing, all outstanding DIP Loan Claims were fully satisfied.

Restaurant Locations

The Proposed Liquidation Plan

The Plan proposes the establishment of the “Cajun Café Liquidating Trust” to receive all remaining estate assets — including cash on hand, retained causes of action, and other excluded assets from the sale — and distribute available proceeds to creditors in accordance with statutory priorities under the Bankruptcy Code. The filing identifies a designated individual to serve as Liquidating Trustee.

The Liquidating Trust assets will include cash on hand as of the effective date, all avoidance actions and causes of action retained by the estate, and any other assets not transferred to the buyer. The Liquidating Trustee will have authority to prosecute avoidance actions, resolve disputed claims, and make distributions to creditors. The Trust is structured to qualify as a “liquidating trust” for federal income tax purposes under Treasury Regulation Section 301.7701-4(d).

The Plan also provides for the deemed rejection of all remaining executory contracts and unexpired leases not previously assumed or rejected, including those associated with the nine Excluded Restaurants, which were rejected as of the closing date of the sale.

Classification and Treatment of Claims and Interests

The Plan classifies claims and interests into five classes, with treatment as follows:

Liquidation Analysis and Best Interests Test

The Plan is accompanied by a Liquidation Analysis prepared by the Debtors’ financial advisor. The analysis estimates that under the Chapter 11 Plan, general unsecured creditors holding approximately $7.44 million in aggregate claims would recover between 5.5% and 6.8% of their claims, compared to a recovery of 4.9% to 6.1% under a hypothetical Chapter 7 liquidation. The analysis attributes the differential in part to additional administrative costs that would arise in a Chapter 7 case, including trustee fees estimated at approximately $50,000 to $53,000 and professional fees estimated at approximately $200,000.

Priority unsecured claims of approximately $113,428 are projected to be paid in full under both scenarios. Subordinated claims and equity interests are not expected to receive any distributions under either scenario. Total estimated net proceeds available for distribution under the Plan range from approximately $525,077 to $619,529.

Key Dates and Deadlines

Professional Representation

The Debtors are represented by Okin Adams Bartlett Curry LLP as general bankruptcy counsel. Stout Capital, LLC served as investment banker, and Stout Risius Ross, LLC served as financial advisor. The Official Committee of Unsecured Creditors is represented by Dykema Gossett PLLC.

Court and Case Information

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 76-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Background on The Phoenix Fund LLC

The Phoenix Fund LLC is a private equity fund established under Act No. 185 of November 12, 2014, known as the Private Equity Fund Law. The fund holds a Tax Exemption Decree effective December 30, 2022, granted pursuant to Puerto Rico's Incentives Code (Act No. 60-2019), and operates under Regulation No. 9461, the Regulation for the Supervision of Private Equity Funds. The fund's business generally involves raising capital from investors to pursue investments.

As a private equity fund operating in Puerto Rico, the fund is subject to the regulatory oversight and authority of the Office of the Commissioner of Financial Institutions of Puerto Rico (OCIF). OCIF is the entity charged under Puerto Rico law to oversee, supervise, and regulate private equity funds, among other financial entities.

Events Leading to the Bankruptcy Filing

On January 27, 2025, OCIF initiated an examination of the fund's operations. OCIF was unable to complete the examination, citing the fund's alleged noncompliance with its regulatory obligations. Following several procedural events, OCIF issued a Consent Order on June 25, 2025, through which Driven, P.S.C. was appointed to conduct a special examination of the fund and all of its affiliated entities.

On February 18, 2026, OCIF issued an Amended Complaint and Order of (I) Cease and Desist, (II) Liquidation of Private Equity Fund, and (III) Interim and Permanent Appointment of Receiver to Carry Out the Liquidation (the Amended Complaint and Receivership Order). The order directed the fund to cease and desist from accepting any new investments, ordered the liquidation of the fund, directed the fund to cooperate fully with the Receiver for the taking of possession of the fund's assets, and appointed Driven, P.S.C. as interim Receiver. Through the order, OCIF conferred upon Driven all faculties and authorities previously held by the fund's members, directors, managers, and authorized persons, including the authority to file voluntary bankruptcy petitions and to act as debtor-in-possession in such a proceeding.

Five days later, on February 23, 2026, the fund's president signed a corporate resolution authorizing the filing of a Chapter 11 bankruptcy petition. The resolution stated that the receivership may not be in the best interest of all stakeholders and that continuation of the fund's affairs without bankruptcy protection may result in the fund's demise. The Chapter 11 petition was filed the same day.

OCIF's Motions Before the Bankruptcy Court

On February 25, 2026, OCIF filed two interrelated motions with the bankruptcy court. The first, a Motion to Continue Enforcement Action, sought an order permitting OCIF to continue its administrative enforcement proceeding, styled Office of the Commissioner of Financial Institutions v. The Phoenix Fund LLC, Case No. C25-V-001, arguing that the automatic stay provisions of the Bankruptcy Code did not apply to bar OCIF's regulatory and police powers. The second, an Urgent Motion Recognizing Authority, sought an emergency order recognizing Driven, P.S.C. as the entity authorized to act as debtor-in-possession on behalf of the fund.

Court's Legal Analysis

The court framed the central legal issue as the intersection of two constitutional principles: the right to file for bankruptcy under Article I, Section 8, Clause 4 of the U.S. Constitution, and the police power of the state under the Tenth Amendment.

Regarding the automatic stay, the court applied the police power exception codified in 11 U.S.C. § 362(b)(4), which exempts from the automatic stay government actions taken to enforce police and regulatory power. The court applied two tests: the "pecuniary purpose" test, which evaluates whether the government action protects the government's pecuniary interest or advances public welfare; and the "public policy" test, which distinguishes between actions that effectuate public policy and those that merely adjudicate private rights.

The court determined that OCIF's intervention was driven by the fund's failure to comply with its obligations under the Incentive Code. It found that the enforcement action was aimed at safeguarding the public welfare of Puerto Rico's financial system, that it conferred no financial benefit on OCIF or any related government agency, and that it did not constitute a collection action. Accordingly, the court held that the police power exception applied and that the automatic stay did not bar OCIF from continuing the enforcement action.

The court further noted that the corporate resolution filed with the bankruptcy petition illustrated the conduct the police power exception is intended to prevent: a debtor seeking refuge in bankruptcy court to frustrate necessary governmental functions.

Authority to Act as Debtor-in-Possession

On the question of authority, the court held that under Puerto Rico law — specifically Section 2044.03(g)(2)(iv) of the Incentive Code and Article 10(b) of the OCIF Enabling Act — OCIF had the authority to order the liquidation of the fund and to appoint a receiver with control over its direction and administration. The court further held that, under federal bankruptcy law, when a receiver is appointed with management authority over a debtor entity, that receiver's status automatically transforms into debtor-in-possession pursuant to 11 U.S.C. § 1101(1).

The court relied on the Second Circuit's decision in In re Bayou Grp., LLC, 564 F.3d 541 (2nd Cir. 2009), which addressed the status of a court-appointed receiver vested with management authority over a debtor upon the commencement of a bankruptcy case. Applying that framework, the court concluded that Driven, P.S.C. — not the fund's prior management — held the exclusive authority to seek bankruptcy protection and act as debtor-in-possession.

The court also cited the Consent Order's provision that the appointment of Driven as Receiver enjoined the fund's directors from filing the bankruptcy petition. In support, the court referenced In re Milestone Educ. Inst., 167 B.R. 716 (Bankr. D. Mass. 1994), which addressed the effect of a receivership order that bars directors from their management functions.

Court's Ruling and Next Steps

The court granted both of OCIF's motions, ruling that the automatic stay is inapplicable to the continued prosecution of the enforcement action in OCIF's administrative forum, including enforcement of the Amended Complaint and Receiver Order, the Consent Order, and the appointment of Driven, P.S.C. as Receiver with authority to act as debtor-in-possession.

The court ordered Driven, P.S.C. to inform the court within twenty-one days how it intends to proceed in the bankruptcy case. A status conference is scheduled for May 19, 2026 at 10:00 AM.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 12 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background

Start Man Furniture, LLC (formerly Art Van Furniture, LLC) operated along with a group of affiliated entities at the time of its bankruptcy filing. The company commenced Chapter 11 cases on March 8, 2020, and the cases were converted to Chapter 7 on April 7, 2020. The Chapter 7 trustee was subsequently appointed to administer the estates of the 13 jointly administered debtor entities.

The Visa/Mastercard Interchange Fee Litigation

The asset at the center of this proposed sale is the debtor's right to recover proceeds from an antitrust class action: In re Payment Card Interchange Fee and Merchant-Discount Antitrust Litigation (Case No. 1:05-md-01720-JG-JO, E.D.N.Y.), which commenced on October 20, 2005.

The litigation was initiated by numerous merchants, retailers, and trade associations against Visa, MasterCard, and other named defendants. The plaintiffs alleged that, beginning January 1, 2004, the defendants conspired to unlawfully fix interchange fees — the fees that a merchant's bank pays a customer's bank when merchants accept cards using card networks such as Visa and MasterCard — as well as other fees charged to merchants for transactions processed over those networks.

Settlement discussions began in December 2011, and the parties executed a Settlement Agreement in October 2012. The Eastern District Court preliminarily approved that agreement in November 2012 and granted final approval in December 2013. On June 30, 2016, the United States Court of Appeals for the Second Circuit vacated both the class certification and the settlement approval.

The parties filed a Superseding and Amended Definitive Class Settlement Agreement on September 18, 2018, proposing a settlement in the range of $5.56 billion to $6.26 billion. The Eastern District Court granted final approval of this revised settlement on December 13, 2019. In March 2023, the Second Circuit affirmed the lower court's approval of the settlement for the damages class. The claims process opened for eligible merchants in December 2023, and the trustee filed a claim with the claims administrator on or about March 26, 2024.

Previous Sale Attempt

The trustee previously sought to sell this asset through a competitive auction process. On October 7, 2020, the trustee filed a motion to sell the estates' rights in the interchange litigation pursuant to bid procedures, which the court approved on October 27, 2020. The trustee solicited bids from interested purchasers; however, the interest and offers received were not high enough and, in the trustee's business judgment, the bidding process was adjourned indefinitely.

The trustee submits that a private sale is now appropriate for three reasons: the Class Action Interchange Litigation has progressed to a point of greater certainty and reduced risk; there is likely to be less interest from buyers seeking upside return; and another auction process is unlikely to yield a significant appreciable benefit through a substantially increased sale price given the costs of running a competitive bid and sale process. The sale remains subject to higher and better offers.

Terms of the Proposed Sale

The asset being sold encompasses all rights, title, and ownership interest of any kind to which the debtor's estate may be entitled from the Class Action Interchange Litigation, including the right to monetary benefits or benefits that may be monetized from settlements, judgments, or any other form of resolution. The sale covers only the rights belonging to Art Van Furniture, LLC and excludes the rights of the other affiliated debtor entities.

The purchaser, Optium Fund 6, executed the Asset Purchase Agreement on March 2, 2026. Key financial terms include:

• Purchase Price: $850,000
• Deposit: 10% of the purchase price, due within one business day of entering into the agreement, to be held in escrow and applied at closing
• Payment of Balance: Within three business days after the later of full execution of the agreement and the Approval Order becoming final and non-appealable
• Closing: Within 15 days of full execution and entry of the sale order, provided the order has not been stayed

The agreement includes no break-up fee, expense reimbursement, or similar bid protections in favor of the purchaser. The sale is governed by the laws of the State of Delaware, with the Bankruptcy Court retaining jurisdiction over any disputes arising under the agreement. The trustee is also seeking a waiver of the 14-day stay under Bankruptcy Rule 6004(h).

Bidding Procedures for Competing Offers

The trustee has reserved the right to accept higher and better offers. The motion establishes the following overbid procedures:

• Any competing bidder must submit a written overbid by email to the trustee and his counsel on or before the Response Deadline set forth in the separately filed notice
• The first overbid must be at least $100,000 above the purchase price, for a minimum total of $950,000
• Any written overbid must be accompanied by a cashier's check in the full amount of the overbid
• Subsequent overbids at any auction must be in increments of at least $100,000
• If qualified competing bids are received, the trustee will, in his sole discretion, either schedule an auction prior to the hearing date or solicit sealed best-and-final bids from all qualified bidders

Legal Basis for the Sale

The trustee seeks approval under Sections 105 and 363 of the Bankruptcy Code. Section 363(b)(1) authorizes a trustee to sell property of the estate outside the ordinary course of business after notice and a hearing. Courts in this district have held that such sales should be approved where the trustee can demonstrate a sound business justification for the proposed transaction. The trustee contends that a sale of the asset would be the most optimal manner to maximize value for the debtor's estates.

The sale is sought free and clear of all liens, claims, interests, and encumbrances pursuant to Section 363(f), with any such interests to attach to the proceeds of the sale with the same priority and validity as existed prior to the sale. The trustee further asserts that Optium Fund 6 is entitled to good faith purchaser protections under Section 363(m), as the transaction was negotiated at arm's length with the assistance of counsel and the purchaser is an independent third party.

Key Dates and Deadlines

• March 2, 2026: Asset Purchase Agreement executed
• March 10, 2026: Motion filed
• March 24, 2026 at 4:00 p.m. (ET): Objection deadline
• April 6, 2026 at 10:00 a.m. (ET): Hearing date

Professional Representation and Court Information

The motion was filed by Pachulski Stang Ziehl & Jones LLP, counsel to the Chapter 7 trustee, in the United States Bankruptcy Court for the District of Delaware, at Courtroom No. 7, 824 Market Street, Wilmington, Delaware 19801.

• Case Name: In re Start Man Furniture, LLC, et al. (f/k/a Art Van Furniture, LLC)
• Case Number: 20-10553 (CTG)
• Docket Number: 1744

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 48-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

Cumulus Media is an audio-first media company that delivers content through 394 owned-and-operated radio stations across 84 markets. The company also operates national audio platforms, including the Westwood One network and the Cumulus Podcast Network, as well as one of the largest streaming audio advertising networks in the United States and a suite of local digital marketing services. As of the petition date, the company employed approximately 3,000 people, including approximately 2,000 full-time employees, of whom approximately 100 were covered by eight collective bargaining agreements.

The company generates revenue primarily from the sale of broadcast radio advertising time to local, regional, and national clients. Digital revenue comes from podcast advertising, streaming audio, display advertising, and local digital marketing services including email marketing, geo-targeted display, video solutions, search engine marketing, website building and hosting, social media management, and search engine optimization. Additional revenue is derived from trade and barter transactions, remote and event revenues, and non-advertising sources such as licensing fees and tower rental income.

Cumulus Media Inc. is a Delaware corporation organized in 2018 as the successor to an entity of the same name that had filed for bankruptcy in November 2017 in the Southern District of New York. The predecessor company and its debtor subsidiaries emerged from those earlier Chapter 11 cases on June 4, 2018.

Events Leading to Bankruptcy

According to the declaration filed in support of the petitions, the Chapter 11 cases are the product of sustained challenges in the broadcast radio industry and broader macroeconomic pressures. Over multiple years, core revenues across the industry have been affected by competition from digital audio and streaming platforms, shifts toward programmatic and performance-based ad buying, and recurring annual declines in radio listenership that were exacerbated by pandemic-era behavioral changes. Despite some recovery in listenership driven by return-to-office trends, annual audience declines have persisted and radio listenership remains below pre-pandemic levels, particularly in large markets where the company operates.

At the same time, persistent inflation increased operating costs including wages, content and production expenses, and third-party services, while elevated benchmark interest rates increased cash interest burdens and tightened credit availability. The company also faced shifts in advertising budgets away from traditional radio and into digital platforms.

To address these challenges, the company undertook a multi-year sequence of operational and strategic initiatives. Since 2018, the company reduced gross debt by approximately $630 million — roughly 50% from 2018 levels — supported by an asset monetization program totaling approximately $510 million. That program included sales of approximately $120 million of land no longer required for operations, approximately $180 million of non-strategic stations, and approximately $210 million of tower assets. These steps were complemented by approximately $120 million of cash generated from operations and opportunistic refinancings.

The 2024 Exchange Transactions

In May 2024, the company completed a series of exchange offers pursuant to a transaction support agreement with an ad hoc group representing approximately 80% of the then-outstanding 2026 Notes and approximately 97% of the then-outstanding 2026 Term Loans. Through these transactions, approximately $328.3 million of the 2026 Term Loan was exchanged for approximately $311.8 million of new 2029 Term Loans, and approximately $323.0 million of the 2026 Notes was exchanged for approximately $306.4 million of new 2029 Notes. Overall, approximately 97% of 2026 Term Loan holders and 94% of 2026 Notes holders participated.

Concurrently, the company amended its ABL Facility to extend its maturity to March 1, 2029, and increase aggregate commitments from $100 million to $125 million. The company also obtained consents to amend the 2026 Credit Agreement and the 2026 Notes Indenture to eliminate substantially all restrictive covenants and certain events of default, release all collateral securing the 2026 Notes, and subordinate the liens securing the 2026 Term Loan. However, because certain holders elected not to participate, small stub amounts of the 2026 Term Loan (approximately $1.2 million) and 2026 Notes (approximately $22.7 million) remained outstanding.

Although the 2024 exchange transactions provided maturity extensions, persistent industry-wide revenue declines and macroeconomic pressures continued to constrain liquidity and free cash flow through 2024 and 2025.

The Nielsen Dispute

The company's financial position was also affected by a dispute with Nielsen Audio, the radio broadcast industry's principal ratings service. In late 2024, Nielsen implemented a new network tying policy that forced any customer owning both a national network and local radio stations to purchase Nielsen's local radio ratings data in all markets in order to access the complete national ratings data product. According to the declaration, this policy placed the company in an untenable position: either assume substantially higher audience measurement costs by purchasing unwanted local ratings data, or lose access to the national ratings data that is critical to selling national advertising.

After consensual negotiations failed, the company filed a complaint against Nielsen in October 2025 in federal court in the Southern District of New York. The company obtained a preliminary injunction against the tying policy on December 30, 2025. On February 2, 2026, Nielsen filed an answer and counterclaims in the underlying litigation. On February 3, 2026, the Second Circuit Court of Appeals granted Nielsen's motion for a stay pending appeal, temporarily staying the preliminary injunction. The litigation remains pending in the District Court for the Southern District of New York.

Prepetition Capital Structure

As of the petition date, the company's funded indebtedness totaled approximately $697.1 million, structured as follows:

Secured Funded Debt:

• ABL Credit Agreement: $55,000,000 (maturing March 1, 2029)
• 2029 Term Loan Credit Agreement: $311,844,954 (maturing May 2, 2029; interest at 8.901%)
• 2029 Notes Indenture: $306,375,000 at 8.00% (maturing July 1, 2029)
• 2026 Term Loan Credit Agreement: $1,202,709 (maturing March 31, 2026; interest at 7.687%)

Unsecured Funded Debt:

• 2026 Notes Indenture: $22,697,000 at 6.75% (maturing July 1, 2026)

The company's equity consisted of 17,128,043 shares of Class A common stock and 312,041 shares of Class B common stock outstanding. Trading in the Class A common stock on the Nasdaq Global Market was suspended on May 2, 2025, as part of Nasdaq's delisting procedures, after which shares began trading on the OTC Markets' OTCQB market tier.

The respective rights of lenders and noteholders are governed by three intercreditor agreements, each dated May 2, 2024, which establish the priority of liens on the company's collateral among the ABL facility, the 2029 debt, and the remaining 2026 debt.

The Restructuring Support Agreement

On March 4, 2026, the company entered into the Restructuring Support Agreement with members of an Ad Hoc Group of secured lenders holding approximately 72.05% of the 2029 Debt Claims. The agreement contemplates a prepackaged Chapter 11 plan designed to reduce the company's funded indebtedness by approximately $592 million and reduce annual cash interest expense by approximately $49 million.

The RSA was the product of arm's-length negotiations that began in the last quarter of 2025, when the company and its advisors began exploring strategic alternatives. While the company originally aimed to complete a restructuring transaction on an out-of-court basis, ongoing industry pressures led the company to begin preparing for a prepackaged filing in early 2026.

Treatment of Claims and Interests

Under the proposed plan, claims and interests would be treated as follows:

Administrative, Tax, Other Priority, and Other Secured Claims: Paid in full in cash on the effective date or in the ordinary course of business.

ABL Facility Claims: Each holder will receive its pro rata share of new loans under a Restated ABL Credit Facility in an amount equal to the allowed ABL Facility Claims. The class is impaired and entitled to vote.

2029 Secured Claims: Each holder will receive its pro rata share of (a) $50 million in Exit Convertible Notes and (b) 95% of the New Common Stock of the reorganized company (subject to dilution from a management incentive plan). The 2029 Secured Claims are deemed allowed in the aggregate amount of $168,579,947. The class is impaired and entitled to vote.

Other Funded Debt Claims (2026 Debt Claims and 2029 Deficiency Claims): Each holder will receive its pro rata share of 5% of the New Common Stock (subject to dilution from the MIP). The 2026 Debt Claims are deemed allowed at $24,192,471 in aggregate, and the 2029 Deficiency Claims at $470,321,003. Distributions owing to 2026 Term Loan Lenders are to be turned over to the 2029 holders pursuant to a junior lien intercreditor agreement. The class is impaired and entitled to vote.

General Unsecured Claims: Paid in the ordinary course of business. The class is unimpaired and conclusively deemed to accept the plan.

Existing Equity Interests: All existing equity interests will be cancelled with no recovery. The class is impaired and conclusively deemed to reject the plan.

Exit Financing

The restructuring contemplates two exit financing facilities. First, the company will enter into a Restated ABL Credit Facility providing for up to $100 million in revolving credit commitments on terms substantially similar to the existing facility. Each holder of an ABL claim has agreed to roll its claim into the restated facility.

Second, the reorganized company will issue $50 million in Exit Convertible Notes with the following material terms: interest at the company's election at either 10.00% payable in kind or 8.00% payable in cash, payable semiannually; maturity on the fifth anniversary of the effective date; mandatory conversion into New Common Stock upon any M&A transaction at an exchange price equal to the midpoint of equity value as set forth in the plan's valuation analysis; and callable at par plus accrued interest. The Exit Notes will be secured by second-priority liens on ABL Collateral and a pari passu first-priority lien on shared collateral.

Use of Cash Collateral

Lenders constituting the requisite majority of ABL Loans, 2029 Term Loans, and 2029 Notes have agreed to the company's consensual use of cash collateral in compliance with an approved budget. As of the petition date, the company held approximately $46 million of cash on hand. The company states that this arrangement will allow it to continue operating its businesses and administer the Chapter 11 cases without seeking debtor-in-possession financing.

Governance Changes

As a condition of the RSA, the company constituted a Transaction Committee of the board of directors comprising three independent directors, including one pre-existing independent director and two new independent directors chosen from nominees of the Ad Hoc Group. On January 28, 2026, the board had appointed an independent director and formed a special restructuring committee and an investigation committee to evaluate restructuring alternatives and conduct an independent review of potential claims against insiders and equity holders, respectively. The restructuring committee was subsequently disbanded upon the effectiveness of the RSA.

The board of directors of the reorganized company will be determined and selected by the Required Consenting 2029 Holders. The reorganized company will be a private company unless otherwise agreed.

Employee Matters

All officers and employees are to be retained in their existing positions following the effective date under their existing employment agreements. However, amended employment agreements will apply to the company's chief executive officer and chief financial officer.

Under the amended CEO agreement, the base salary will be reduced from $1,450,000 to $1,250,000, the annual target bonus will be reduced from $1,450,000 to $1,250,000 (capped at 200% of base salary), the non-change-in-control severance multiple will change from 1.5x to 1.75x, and the change-in-control severance multiple will change from 2.5x to 2.25x.

Under the amended CFO agreement, the base salary will be reduced from $800,000 to $700,000, the annual target bonus will be reduced from $800,000 to $700,000 (capped at 200% of base salary), the non-change-in-control severance multiple will change from 1.5x to 1.0x, and the change-in-control severance multiple will change from 2.0x to 1.5x.

Both executives will forfeit all amounts and entitlements previously awarded under the company's 2020 Equity and Incentive Compensation Plan.

A management incentive plan will reserve 10% of New Common Stock on a fully diluted basis, with terms to be fixed by the new board. If the new board does not allocate and grant MIP awards within 90 days of the effective date, each existing employee participant in the prior equity plan will have the right to resign for good reason and receive contractual cash severance entitlements.

Key Dates and Milestones

The RSA contemplates the following milestones for the restructuring:

• March 4, 2026: Solicitation of creditor acceptance launched; RSA executed
• March 5, 2026: Petition Date; Plan, Disclosure Statement, Scheduling Motion, and Cash Collateral Motion filed
• Within 3 days of petition: Scheduling Order and Interim Cash Collateral Order to be entered
• Within 30 days of petition: Final Cash Collateral Order to be entered (extendable by up to 25 days to align with the confirmation hearing)
• Within 55 days of petition: Confirmation Order to be entered
• Within 75 days of confirmation: Plan Effective Date (extendable by up to 120 additional days solely for regulatory approvals)

First Day Motions

The company filed a series of first day motions seeking, among other things, authority to continue operating its cash management system, honor employee wages and benefits, pay certain prepetition trade creditor obligations, pay taxes and fees, maintain utility services, establish procedures regarding transfers of interests for net operating loss preservation, maintain customer programs, continue insurance coverage, and use cash collateral on an interim basis. Administrative motions sought joint administration, consolidated creditor lists, FCC compliance procedures, and retention of Verita Global (Kurtzman Carson Consultants) as claims and noticing agent.

Professional Representation

The company is represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP as restructuring counsel, Moelis & Company LLC as investment banker, and Alvarez & Marsal North America, LLC as financial advisor. The Ad Hoc Group of secured lenders is represented by Gibson, Dunn & Crutcher LLP as counsel and Guggenheim Securities, LLC as financial advisor. The case is pending in the United States Bankruptcy Court for the Southern District of Texas under Case No. 26-90346 (ARP).

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 126 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

Company Background and Business Operations

The three debtor entities filed voluntary Chapter 11 petitions on February 2, 2026. The debtors' service address is 13809 Research Boulevard, Suite 785, Austin, Texas 78750.

The debtors' primary assets consist of rights and arrangements to procure, control, and utilize electrical power at their operating facilities, together with related site-control interests, operational infrastructure, customer and revenue-generating relationships, and associated equipment and personal property. The motion collectively refers to these as the "Assets."

Business Justification for the Sale

The debtors have determined, in the exercise of their business judgment, that a timely sale of all or part of their assets is in the best interests of the debtors, their estates and creditors, and all parties in interest. The motion states that a protracted Chapter 11 case could permanently deplete the value of the debtors' estates.

The debtors have retained Synteq Digital Operations US, LLC as their broker, subject to court approval. The broker retention application was filed on February 10, 2026. The sale timeline was developed in consultation with the broker and the DIP lender.

The motion notes that if, during the marketing period, a party expresses interest in providing exit financing or infusing capital into the debtors, the debtors will consider such proposals.

Proposed Bidding Procedures

The amended motion provides for three possible sale approaches: a negotiated sale with a designated purchaser, a stalking horse bid followed by an auction, or an auction without a stalking horse bidder. Each approach requires the consent of the DIP lender.

Qualified Bid Requirements

To submit a qualified bid, a potential buyer must satisfy several requirements, including submitting a signed definitive purchase and sale agreement identifying the assets to be purchased and the purchase price. Bids may not contain any financing or due diligence contingencies and must be all-cash payable in full at closing. Each bid must be sufficient to pay the DIP obligations in full in cash and must be accompanied by evidence of financial capability.

Bidders must fully disclose their legal identity, include a good faith deposit equal to ten percent of the purchase price, and agree that their offer is irrevocable through the earlier of the closing of a sale transaction or May 29, 2026.

Stalking Horse Provisions

The debtors seek authority to designate a stalking horse bidder by March 4, 2026 at 5:00 p.m. If designated, the stalking horse bidder would be entitled to bid protections consisting of a break-up fee of no more than three percent of the purchase price and expense reimbursement not to exceed one and one-half percent of the purchase price. The motion cites prior court approvals of similar protections in the Western District of Texas.

As of the filing of the amended motion, the debtors had not received a stalking horse bid.

Auction Procedures

If the debtors receive one or more qualified bids, an auction may be conducted in a public outcry format on April 8, 2026 at 10:00 a.m. at the offices of the debtors' counsel. Only qualified bidders and their legal and financial advisors may attend the auction, which will be transcribed by a certified court reporter.

Bidding at the auction will commence at the initial highest bid. Subsequent bids must exceed the baseline bid plus any bid protections by at least $50,000, with incremental bid amounts to be determined at the auction.

The DIP lender is entitled to credit bid all or a portion of its outstanding obligations under Section 363(k) of the Bankruptcy Code and is deemed a qualified bidder for all purposes.

Sale Free and Clear of Liens

The debtors seek to sell the assets free and clear of all liens, claims, interests, and encumbrances under Section 363(f) of the Bankruptcy Code. All existing liens will attach to the sale proceeds with the same validity, priority, force, and effect. The motion states that a sale subject to existing encumbrances would result in a lower purchase price and be less beneficial to the estates.

Assumption and Assignment of Contracts

In connection with the sale, the debtors propose procedures for the assumption and assignment of executory contracts and unexpired leases to the successful bidder under Section 365 of the Bankruptcy Code. The debtors will serve an assumption and assignment notice identifying the contracts that may be assumed and assigned, the proposed cure amounts, and the applicable objection deadlines.

Counterparties that fail to timely object will be deemed to have consented to the proposed cure amounts and assumption and assignment. Any disputed cure claims will be presented to the court at the sale hearing or at a later date.

Key Dates and Timeline

• March 3, 2026: Amended motion filed
• March 4, 2026, 5:00 p.m. CT: Deadline to designate stalking horse bidder
• March 9, 2026, 9:30 a.m. CT: Hearing on the motion
• March 11, 2026, 5:00 p.m. CT: Objection deadline for stalking horse designation
• April 3, 2026, 5:00 p.m. CT: Bid deadline
• April 5, 2026, 5:00 p.m. CT: Notification of qualified bidders
• April 8, 2026, 10:00 a.m. CT: Auction (if qualified bids received)
• April 9, 2026: Auction results filed with court
• April 15, 2026: Requested sale hearing date; assumption and assignment objection deadline
• May 29, 2026: Qualified offers irrevocable through this date

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 56 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.

The Plan was unanimously approved by all voting creditor classes, with no economic stakeholder objecting to confirmation. The case is jointly administered under Case No. 25 B 01705.

Company Background and Business Operations

The Debtors are eight not-for-profit entities that own and operate continuing care retirement communities, assisted living facilities, and a skilled nursing facility across Illinois and Indiana. As of October 2025, approximately 765 residents aged 62 and older lived in the Debtors' communities. The Debtors have operated with a faith-based mission inclusive of all backgrounds for more than 130 years.

Four of the debtor entities operate as continuing care retirement communities. Two additional entities provide assisted living services. One entity serves as the management company overseeing all communities, and another functions as a charitable foundation supporting impoverished residents and spiritual programming. The sole corporate member of each debtor entity (other than one) is a non-debtor not-for-profit corporation.

Six of the eight Debtors—referred to as the Obligated Group Debtors—are jointly obligated on approximately $182 million in bond debt for which a national bank serves as Master Trustee and Bond Trustee. The Debtors also carried secured obligations to a faith-based lender, including approximately $4 million drawn on a line of credit and approximately $7 million in additional subordinated debt.

Events Leading to Bankruptcy

The Debtors' ability to service their debt obligations was impaired by both the immediate impact of COVID-19 on occupancy rates and lasting structural changes to the senior care industry. As a result, the Obligated Group Debtors defaulted on their secured debts. In October 2024, the Master Trustee accelerated the bond obligations.

On January 30, 2025, the bond trustee filed suit in the U.S. District Court for the Northern District of Illinois and sought the emergency appointment of a receiver over the Obligated Group Debtors and their assets. A hearing on the receiver appointment was set for February 4, 2025, but the Debtors commenced their Chapter 11 cases before that hearing could take place.

The year following the bankruptcy filing involved disputes between the Debtors and their secured creditors, tort claimants, regulators, and general unsecured creditors. Disputes included the management fee paid by the Obligated Group Debtors to the management company, which was ultimately capped at 9% of revenue following two months of negotiations. Six tort claimants filed substantially similar motions for relief from the automatic stay, all of which the court denied. The Debtors also filed an adversary proceeding against the Illinois Department of Public Health after the agency issued emergency permit suspension notices to two communities—not due to care issues, but for failure to file annual audited financial statements. That dispute was resolved without a contested hearing.

On February 20, 2025, the U.S. Trustee appointed a five-member official committee of unsecured creditors, which included three residents. The Committee investigated potential claims against the management company under Sections 547 and 548 of the Bankruptcy Code related to prepetition management fees and allocations, as well as potential claims against certain members of management for prepetition incentive compensation.

The Confirmed Plan of Reorganization

The Plan implements a series of integrated settlements between the Debtors, their secured lenders, and the Committee. The Debtors filed their first Disclosure Statement and Plan in November 2025, subsequently amending the documents multiple times to address objections and incorporate settlement terms with both the faith-based secured lender and the Committee.

The court authorized solicitation on January 14, 2026, and the confirmation hearing was held on February 25, 2026. Every voting creditor unanimously voted in favor of the Plan across all seven voting classes.

Key terms of the confirmed Plan include:

• Refinancing approximately $180 million of bond debt, with a four-year moratorium on principal payments and a 29-year amortization schedule. Bondholders, though impaired, are projected to realize 100% of the value of their claims over time.
• Refinancing the approximately $4 million line of credit with the faith-based lender.
• Satisfying approximately $8.5 million of secured debt owed to the faith-based lender, after giving effect to its waiver of accrued interest and fee claims.
• Cash distributions with an estimated value of 30% to 41% on general unsecured claims at the Obligated Group Debtors, funded by proceeds from retained causes of action, any remainder in the cure cost reserve account, and a $1.4 million cash settlement payment negotiated by the Committee.
• Payment in full of general unsecured claims at the Non-Obligated Group Debtors.
• Relief from the Plan injunction so that personal injury tort claimants may pursue available insurance in sole satisfaction of their claims.
• Assumption and cure of all residency agreements and payment in full of resident refund obligations from the escrow account established at the beginning of the cases.
• Mutual releases of claims (Estate Releases and Third-Party Releases).
• Exculpation of certain parties.

Treatment of Claims and Interests

Unimpaired classes—including other priority claims, the faith-based lender's secured claims, general unsecured claims at the Non-Obligated Group Debtors, and residential claims—are deemed to accept the Plan and will be paid in full. Impaired classes that voted to accept include bondholders, the faith-based lender's line of credit claim, general unsecured claims at the Obligated Group Debtors, and insured tort claims. Intercompany claims are the sole class deemed to reject, as they receive no distribution.

The Plan provides for deemed substantive consolidation of the eight Debtors' estates into two groups—the Obligated Group and the Non-Obligated Group—solely for voting and distribution purposes. The court found this administrative consolidation appropriate to reduce costs in administering the General Unsecured Trust, noting it would be administratively burdensome to require the trustee to maintain six sub-trusts and allocate proceeds among them on an entity-by-entity basis given how the Debtors operated under unified management.

U.S. Trustee's Objections and the Court's Rulings

The U.S. Trustee raised objections to five Plan provisions: the deemed substantive consolidation, the scope of estate releases, the third-party releases as non-consensual under the Supreme Court's 2024 decision in Harrington v. Purdue Pharma L.P., the breadth of the exculpation provision, and the injunction and gatekeeper provisions. The court overruled all five objections.

On deemed substantive consolidation, the court found it was limited to voting and distributions, that no Bankruptcy Code provision prohibits it, and that it was a reasonable administrative approach given how the Debtors operated as a single managed enterprise.

On estate releases, the court found them to be in the best interests of the estates as part of the global settlement. The Debtors are releasing only claims they are not retaining and have not already settled, while preserving retained causes of action (including avoidance actions) for the benefit of the General Unsecured Trust.

The Court's Analysis of Third-Party Releases

The opinion's analysis of the third-party release provisions spans approximately 30 pages. The court held that consensual third-party releases remain permissible under Seventh Circuit law after the Supreme Court's Purdue decision, citing the Seventh Circuit's decision in Matter of Specialty Equipment Cos. (3 F.3d 1043, 7th Cir. 1993). The court noted that the Purdue majority explicitly declined to disturb the law on consensual releases and affirmatively cited Specialty Equipment in doing so.

On whether the opt-out mechanism can demonstrate consent, the court surveyed the split in authority across jurisdictions—including decisions from New York, Delaware, Texas, Georgia, and New Jersey—and concluded that, under the facts of this case, the opt-out framework validly implied consent. The court relied on Seventh Circuit precedent establishing that in bankruptcy, silence with adequate notice constitutes consent, citing FutureSource LLC v. Reuters Ltd. (312 F.3d 281, 7th Cir. 2002) and Fogel v. Zell (221 F.3d 955, 7th Cir. 2000).

The court rejected the U.S. Trustee's argument that state contract law principles require affirmative acceptance, noting that confirmed plans bind all stakeholders who receive notice regardless of whether they vote, and that the U.S. Trustee's theory, if accepted, could undermine the Chapter 11 process by exempting non-participating creditors from the terms of confirmed plans.

The court also drew an analogy to class action settlements under Federal Rule of Civil Procedure 23, where absent class members who receive notice and fail to opt out are bound by settlement terms, observing that the bankruptcy process provides at least as much notice and protection to creditors as the class action process.

The Debtors made concessions during the confirmation process, removing from the definition of Releasing Parties those holders who abstained from voting, those who voted no without checking the opt-out box, and those deemed to reject. Of 183 total creditors who voted, 21 parties (eleven voters and ten non-voters) opted out of the third-party releases. The court approved the releases as applied to creditors who voted yes and those deemed to accept (being paid in full) who did not opt out.

The third-party releases are narrowed by a provision excluding any claim to which a Debtor would not be a required party under Federal Rule of Civil Procedure 19 or its state equivalent.

The Court's Analysis of Exculpation

The court distinguished exculpation from discharge, stating that a discharge extinguishes a legal duty to pay a debt that existed, while an exculpation is a determination that a party had no obligation in the first place absent gross negligence or willful misconduct. The court rejected the U.S. Trustee's argument that the exculpation provision violates Section 524(e) of the Bankruptcy Code.

The court followed the analytical framework articulated by the Southern District of New York in In re Aegean Marine Pet. Network Inc. and In re Voyager Digital Holdings, Inc., holding that exculpation provisions serve to protect both court-supervised fiduciaries and court-supervised and court-approved transactions from challenges absent gross negligence or willful misconduct.

The exculpation applies only to postpetition acts or omissions related to the Chapter 11 filing, the administration of the cases, the Plan, and the restructuring.

The Court's Analysis of Injunction and Gatekeeper Provisions

The court found it has jurisdiction to enforce its own orders and to enter an injunction implementing the Plan's discharge, release, and exculpation provisions, citing 28 U.S.C. § 1334(b), 11 U.S.C. § 105(a), and the Supreme Court's decision in Celotex Corp. v. Edwards.

On the gatekeeper provision, the court clarified that it authorizes the bankruptcy court only to determine whether post-confirmation suits colorably circumvent the court's orders—not to rule on the underlying merits of any claim outside the bankruptcy court's jurisdiction. The court stated it will not apply Federal Rule of Civil Procedure 12(b)(6) or state-law pleading standards to post-confirmation claims, but will only assess whether a suit circumvents the Plan, the Confirmation Order, or the court's prior orders.

Key Dates

• January 30, 2025: Bond trustee filed suit and sought emergency receiver appointment
• February 4, 2025: Scheduled hearing date for receiver appointment (preempted by bankruptcy filing)
• February 20, 2025: U.S. Trustee appointed five-member creditors' committee
• November 2025: Debtors filed first Disclosure Statement and Plan
• January 7, 2026: Debtors filed Amended Disclosure Statement and Amended Plan
• January 14, 2026: Court granted conditional approval of Disclosure Statement and authorized solicitation
• February 25, 2026: Confirmation hearing held
• March 4, 2026: Opinion issued confirming Plan and approving Disclosure Statement

Case Information

• Court: United States Bankruptcy Court for the Northern District of Illinois, Eastern Division
• Case Number: 25 B 01705 (Jointly Administered)
• Judge: Hon. Michael B. Slade
• Document: Memorandum Opinion (Dkt. No. 800), 72 pages

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 72 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.