Near Total Recovery in Adelphia's Bankruptcy Proceedings
White & Case Counsel on One of the Most Significant Chapter 11 Recoveries in US History
April 24, 2007 ... Adelphia Communications Corporation and its affiliated debtor subsidiaries completed distributions to creditors pursuant to its Modified Fifth Amended Joint Chapter 11 Plan this February, after what has been described as one of the most complex Chapter 11 bankruptcy proceedings in United States history.
White & Case was retained by the Ad Hoc Committee of Arahova Noteholders, one of the principal unsecured creditor constituencies in the case, in the spring of 2005, after various positions taken by the debtors and other creditor constituencies threatened to materially reduce Arahova creditor recoveries from full par plus accrued interest to mere cents on the dollar.
"The case involved potential shifting of billions of dollars of value around the corporate enterprise," said Miami-based partner Thomas E Lauria, chairman of the Firm's Global Financial Restructuring and Insolvency Group. "More than $2 billion of creditor recoveries were at stake for Arahova creditors. Together with the Ad Hoc Committee, our work was instrumental in negotiating a global settlement between and among a majority of all creditor constituencies fragmented throughout the entire Adelphia capital structure."
What ensued was nearly two years of intense, contentious litigation over the bona fides of Adelphia's general ledgers. With billions of dollars of creditor recoveries at stake, certain major parties finally agreed on a term sheet resolving the inter-debtor disputes and, importantly, providing for near payment in full for Arahova creditors. Under the prior plans of reorganization proposed by the Debtors and pursuant to the May 2005 schedules, the default distribution for Arahova creditors had been in the low 20 cents on the dollar. Instead, as a direct result of White & Case's efforts, Arahova stakeholders were positioned to receive a nearly full recovery — an approximate $2 billion improvement in recoveries on a class basis.
White & Case then took the lead role in developing the plan and structuring the Ad Hoc Committee's recovery, which included cash, stock and certificated litigation trust interests, freely tradable on a national exchange, in one of the largest litigation trust vehicles ever created in a Chapter 11 case.
Capping off more than 21 months of White & Case's involvement on behalf of the Ad Hoc Committee — including 11 weeks of trial in the winter of 2006 and weekly court-ordered settlement negotiations throughout the summer of 2006, the bankruptcy court confirmed the plan and endorsed the settlement, granting a nearly full recovery to the Arahova Noteholders.
Along with partner Thomas E Lauria, the White & Case team was led by New York partners J. Christopher Shore and Gerard Uzzi. In New York, the team comprised partners Wayne Cross, Robert Milne, Michael Gallagher, Jack Pace, James Hayden and Colin Diamond, and associates Meghan McCurdy, David Ernst, John Chung, Douglas Baumstein, Victoria Kennedy, Raj Gandesha, Victoria Oswald, Kendra Goldenberg and Jessica Marchand. In Miami, associates Richard Kebrdle, Kevin McGill, Fernando Menendez and Lane Begy also advised the committee.
White & Case has taken a lead role in a number of major US bankruptcy proceedings, including the completion of a three-year restructuring of one of the world's largest energy trading companies, Mirant Corporation, in which the Firm acted as debtors' counsel; advising on the cross-border restructuring of Corporación Durango, the largest papermaker in Mexico; representing hedge fund Appaloosa Management in connection with being the principal equity investor for the proposed restructuring of Delphi, one of the largest manufacturing restructurings in US history; and representing French governmental agency CDR Creances as mortgagee and judgment creditor, in the successful prosecution of an involuntary bankruptcy petition against the owner of the Flatotel building in Manhattan.
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