12-14815-alg Doc 194 Filed 10/06/14 Entered 10/06/14 11:42 ... · case no. 12-14815(alg) memorandum of law in support of entry of an order confirming the first amended plan of liquidation

KLESTADT & WINTERS, LLP 570 Seventh Avenue, 17th Floor New York, New York 10018 Tel: (212) 972-3000 Fax: (212) 972-2245 Tracy L. Klestadt Joseph C. Corneau Attorneys for the Debtor and Debtor in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INTELLITRAVEL MEDIA, INC. d/b/a Budget Travel, Debtor.

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Chapter 11 Case No. 12-14815(ALG)

MEMORANDUM OF LAW IN SUPPORT OF ENTRY OF AN ORDER CONFIRMING THE FIRST AMENDED PLAN OF LIQUIDATION OF

INTELLITRAVEL MEDIA, INC. D/B/A BUDGET TRAVEL PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE

12-14815-alg Doc 194 Filed 10/06/14 Entered 10/06/14 11:42:14 Main Document Pg 1 of 48

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TABLE OF CONTENTS TABLE OF AUTHORITIES ...........................................................................................................v

I. PRELIMINARY STATEMENT ............................................................................................1

II. BACKGROUND AND OVERVIEW OF THE PLAN ..........................................................2

A. Pre-Petition Background and Events Leading to Chapter 11 Case ................................2

i. Organizational Structure .......................................................................................2

ii. Nature of the Debtor’s Business ...........................................................................3

iii. The Bankruptcy Case ............................................................................................3

iv. The Sale ................................................................................................................4

B. The Plan .........................................................................................................................5

C. The Solicitation of Votes and Noticing of Non-Voting Classes ....................................6

III. THE PLAN SHOULD BE CONFIRMED .............................................................................8

A. The Plan Complies With The Applicable Provisions of Title 11

(Section 1129(a)(1)) .....................................................................................................10

i. The Plan Designates Classes of Claims and Interests .........................................12

ii. The Plan Identifies Unimpaired Classes of Claims and Interests .......................13

iii. The Plan Specifies The Treatment of Impaired Classes .....................................13

iv. The Plan Provides The Same Treatment Within Each Class ..............................13

v. The Plan Provides Adequate Means for Implementation ...................................13

vi. Prohibition On The Issuance Of Non-Voting Securities ....................................14

vii. Selection Of Trustees, Member And Manager ...................................................14

viii. Impairment and Non-Impairment of Claims and Interests .................................16

ix. Executory Contracts and Unexpired Leases .......................................................16

x. Settlements and Retention of Claims ..................................................................17


iii

xi. Sale of Property and Distribution of Proceeds ....................................................17

xii. Modification of Rights of Holders of Secured Claims and Unsecured

Claims .................................................................................................................18

xiii. The Plan Includes Other Provisions That Are Not Inconsistent With Applicable Sections Of The Bankruptcy Code ...................................................18

B. The Debtor Has Complied With The Applicable Provisions Of

Title 11 (Section 1129(a)(2)) .......................................................................................19

C. The Plan Was Proposed In Good Faith (Section 1129(a)(3)) ......................................21

D. All Payments To Be Made By The Estate In Connection With This Case Are Subject To The Approval Of The Court (Section 1129(a)(4)) ....................................23

E. Disclosure of All Required Information Regarding Post-Confirmation Directors,

Management and Insiders (Section 1129(a)(5)) ..........................................................24

F. The Plan Does Not Provide For Any Rate Change Subject To Regulatory Approval (Section 1129(a)(6)) .....................................................................................26

G. The Plan Satisfies The “Best Interests” Test (Section 1129(a)(7)) ..............................26

H. Each Impaired Class, Except for Class 5, Has Voted to Accept the Plan

(Section 1129(a)(8)) .....................................................................................................28

I. The Plan Provides For The Payment Of Priority Claims (Section 1129(a)(9)) ...........30

J. The Plan Has Been Accepted By At Least One Impaired, Non-Insider Class (Section 1129(a)(10)) ...................................................................................................31

K. The Plan Is Feasible or Feasibility Analysis Not Applicable

(Section 1129(a)(11)) ...................................................................................................31

L. The Plan Provides For The Payment of Certain Fees (Section 1129(a)(12)) ..............32

M. Preservation of Retiree Benefits ..................................................................................32

N. Domestic Support Obligations .....................................................................................33

O. Requirements for Individual Chapter 11 Cases Not Applicable ..................................33

P. Property Transfers By Corporations or Trusts that are not Moneyed, Business or Commercial Corporations or Trusts .........................................................33


iv

Q. Fair and Equitable; No Unfair Discrimination (Section 1129(b)) ...............................34

i. The Plan Does Not Discriminate Unfairly With Respect to Rejecting

Classes ..................................................................................................................34

ii. The Plan is Fair and Equitable With Respect to Rejecting Classes .....................35

R. Confirmation of One Plan (Section 1129(c)) ...............................................................36

S. The Principal Purpose of the Plan is Not Avoidance of Taxes or Section 5 of the Securities Act (Section 1129(d)) ..................................................................................36

T. Compliance with Bankruptcy Rule 3016 .....................................................................36

CONCLUSION ..............................................................................................................................38


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TABLE OF AUTHORITIES

Page(s)

Cases: ACC Bondholder Group v. Adelphia Communications Corp.,

(In re Adelphia Communications Corp.), 361 B.R. 337 (S.D.N.Y. 1997) ................................ 26 Coltex Loop Central Three Partners, L.P. v. BT/SAP Pool C Assocs, L.P.,

(In re Coltex Loop Central Three Partners, L.P.), 138 F.3d 39 (2d Cir. 1998) .......................... 8 Corestates Bank N.A. v. United Chemical Techs., Inc.,

202 B.R. 33 (Bankr. E.D. Pa. 1996) ........................................................................................... 9 Heartland Fed. Sav. & Loan Ass'n v. Briscoe Enters.,

(In re Briscoe Enters.), 994 F.2d 1160(5th Cir. 1993) ................................................................ 9 In re 203 North LaSalle St. Ltd. P'ship,

190 B.R. 567 (Bankr. N.D. Ill. 1995) ....................................................................................... 35 In re Adelphia Communications Corp.,

368 B.R. 140, 252 (Bankr. S.D.N.Y. 2007) ................................................................................ 9 In re Best Prods. Co.,

168 B.R. 35(Bankr. S.D.N.Y. 1994) ......................................................................................... 27 In re Celestial Homes, Inc.,

108 B.R. 36 (Bankr. S.D.N.Y. 1989) ........................................................................................ 16 In re Century Glove, Inc., No. 90-400,1993 U.S. Dist. LEXIS 2286 (D. Del. Feb. 10, 1993) ........................................... 27 In re Deer Park, Inc.,

136 B.R. 815 (9th Cir. B.A.P. 1992)......................................................................................... 22 In re Drexel Burnham Lambert Grp, Inc.,

138 B.R. 760 (Bankr. S.D.N.Y. 1992) ................................................................................ 25, 26 In re Drexel Burnham Lambert Group Inc., 139 B.R. 723 (Bankr. S.D.N.Y. 1992) ................................................................................ 10, 11 In re Elsinore Shore Assocs.,

91 B.R. 238 (Bankr. D. N.J. 1988) ........................................................................................... 23 In re Granite Broadcasting Corp.,

369 B.R. 120 (Bankr. S.D.N.Y. 2007) ................................................................................ 21, 22


vi

In re Holywell Corp.,

913 F.2d 873 (11th Cir. 1990) .................................................................................................. 11 In re Jersey City Med. Center, 817 F.2d 1055 (3d Cir. 1987).................................................................................................... 11 In re Johns-Manville Corp.,

68 B.R. 618 (Bankr. S.D.N.Y. 1986) .................................................................................. 23, 34 In re Koelbl,

751 F.2d 137 (2d Cir. 1984)...................................................................................................... 21 In re Labrum & Doak, LLP,

227 B.R. 372 (Bankr. E.D. Pa. 1998) ....................................................................................... 27 In re Lionel L.L.C., 2008 Bankr. LEXIS 1047 (Bankr. S.D.N.Y. March 31, 2008) ........................................... 21, 22 In re Montgomery Ct Apartments of Ingham County, Ltd.,

141 B.R. 324 (Bankr. S.D. Ohio 1992) ..................................................................................... 35 In re Oneida Ltd.,

351 B.R. 79 (Bankr. S.D.N.Y. 2006) ........................................................................................ 21 In re Plus Holding Corp.,

228 F.3d 224 (3d Cir. 2000)...................................................................................................... 22 In re Richard Buick, Inc.,

126 B.R. 840 (Bankr. E.D. Pa. 1991) ......................................................................................... 9 In re Source Enters, Inc., No. 06-11707, 2007 LEXIS 4996 (Bankr. S.D.N.Y. Oct. 1, 2007), aff'd 392 B.R. 541

(S.D.N.Y. 2008) ........................................................................................................................ 22 In re Spiegel, Inc., No. 03-11540, 2005 LEXIS 1113 (Bankr. S.D.N.Y. May 25, 2005) ....................................... 14 In re Texaco Inc.,

84 B.R. 893 (Bankr. S.D.N.Y. 1988) .................................................................................. 11, 21 In re Texas Extrusion Corp., 844 F.2d 1142, 1160 (5th Cir. 1988) ........................................................................................ 21 In re The Leslie Fay Co., Inc.,

207 B.R. 764 (Bankr. S.D.N.Y. 1997) .......................................................................... 21, 26, 27


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In re WorldCom Inc., 2003 Bankr. LEXIS 1401(Bankr. S.D.N.Y. Oct. 31, 2003) ........................................... 9, 10, 19 Kane v. Johns-Manville Corp.,

843 F.2d 636 (2d Cir. 1988)................................................................................................ 10, 21 Lubrizol Enters. v. Richmond Metal Finishers,

756 F.2d 1043 (4th Cir. 1985) .................................................................................................. 17 N.L.R.B. v. Bildisco & Bildisco,

465 U.S. 513 (1984) .................................................................................................................. 16 Norwest Bank Worthington v. Ahlers,

485 U.S. 197 (1988) .............................................................................................................. 8, 35 Public Finance Corp. v. Freeman,

(In re Public Finance Corp), 712 F.2d 219 (5th Cir. 1983) ...................................................... 21 Teamster's Nat'l Freight Indus. Negotiating Comm. v. U.S. Truck Co.,

(In re U.S. Truck Co.), 800 F.2d 581 (6th Cir. 1986) ............................................................... 11 The Argo Fund Ltd. v. Bd. of Dirs. Of Telecom Argentina, S.A. (In re Bd. of Dirs. Of Telecom

Argentina, S.A.),, 2008 U.S. App. LEXIS 11397 (2d Cir. May 29, 2008) ............................................................ 21

Williams v. Hibernia Nat'l Bank,

(In re Williams), 850 F.2d 250 (5th Cir. 1988) ........................................................................... 8

Statutes: 11 U.S.C. § 363 .............................................................................................................................. 4 11 U.S.C. § 365 ........................................................................................................................ 4, 16 11 U.S.C. § 365(a) ................................................................................................................. 16, 17 11 U.S.C. § 506(b) ........................................................................................................................ 19 11 U.S.C. § 507(a)(1) .................................................................................................................... 30 11 U.S.C. § 507(a)(1)(C) .............................................................................................................. 30 11 U.S.C. § 507(a)(2) .............................................................................................................. 12, 30 11 U.S.C. § 507(a)(3) ............................................................................................................. 12, 30 11 U.S.C. § 507(a)(4) .................................................................................................................... 30


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11 U.S.C. § 507(a)(5) .................................................................................................................... 30 11 U.S.C. § 507(a)(6) .................................................................................................................... 30 11 U.S.C. § 507(a)(7) .................................................................................................................... 30 11 U.S.C. § 507(a)(8) .................................................................................................................... 12 11 U.S.C. § 1114 .......................................................................................................................... 32 11 U.S.C. § 1122 ........................................................................................................ 10, 11, 12, 19 11 U.S.C. § 1122(a) ...................................................................................................................... 11 11 U.S.C. § 1123 .............................................................................................................. 10, 11, 19 11 U.S.C. § 1123(a) ...................................................................................................................... 12 11 U.S.C. § 1123(a)(1) ..................................................................................................... 11, 12, 13 11 U.S.C. § 1123(a)(2) ................................................................................................................. 13 11 U.S.C. § 1123(a)(3) ................................................................................................................. 13 11 U.S.C. § 1123(a)(4) ................................................................................................................. 13 11 U.S.C. § 1123(a)(5) ........................................................................................................... 13, 14 11 U.S.C. § 1123(a)(6) ................................................................................................................. 14 11 U.S.C. § 1123(a)(7) ........................................................................................................... 14, 15 11 U.S.C. § 1123(b) ................................................................................................... 15, 16, 17, 18 11 U.S.C. § 1123(b)(1) ........................................................................................................... 15, 16 11 U.S.C. § 1123(b)(2) ........................................................................................................... 15, 16 11 U.S.C. § 1123(b)(3) ................................................................................................................. 17 11 U.S.C. § 1123(b)(3)(A) ............................................................................................................ 15 11 U.S.C. § 1123(b)(3)(B) ............................................................................................................ 15 11 U.S.C. § 1123(b)(4) ........................................................................................................... 15, 17


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11 U.S.C. § 1123(b)(5) ........................................................................................................... 16, 18 11 U.S.C. § 1123(b)(6) ........................................................................................................... 16, 18 11 U.S.C. § 1123(c) ................................................................................................................ 18, 19 11 U.S.C. § 1123(d) ...................................................................................................................... 19 11 U.S.C. § 1125 .......................................................................................................................... 19 11 U.S.C. § 1126 .......................................................................................................... 2, 19, 20, 28 11 U.S.C. § 1126(a) ...................................................................................................................... 20 11 U.S.C. § 1126(c) ............................................................................................................... 28, 29 11 U.S.C. § 1126(f) ............................................................................................................. 6, 20, 28 11 U.S.C. §1126(g) ............................................................................................................ 6, 21, 29 11 U.S.C. § 1129 ............................................................................................................................ 9 11 U.S.C. § 1129(a) ........................................................................................................................ 9 11 U.S.C. § 1129(a)(1) ..................................................................................................... 10, 11, 19 11 U.S.C. § 1129(a)(2) ............................................................................................................ 19, 21 11 U.S.C. § 1129(a)(3) ...................................................................................................... 21, 22, 23 11 U.S.C. § 1129(a)(4) ...................................................................................................... 23, 24, 33 11 U.S.C. § 1129(a)(5) ........................................................................................................... 15, 24 11 U.S.C. § 1129(a)(5)(A)(i) ........................................................................................................ 24 11 U.S.C. § 1129(a)(5)(A)(ii) ................................................................................................. 24, 25 11 U.S.C. § 1129(a)(5)(B) ..................................................................................................... 25, 26 11 U.S.C. § 1129(a)(6) .................................................................................................................. 26 11 U.S.C. § 1129(a)(7) ...................................................................................................... 19, 26, 28 11 U.S.C. § 1129(a)(8) ............................................................................................................ 28, 29


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11 U.S.C. § 1129(a)(9) ............................................................................................................ 30, 31 11 U.S.C. § 1129(a)(9)(A) ............................................................................................................ 30 11 U.S.C. § 1129(a)(9)(C) ............................................................................................................ 30 11 U.S.C. § 1129(a)(10) ................................................................................................................ 31 11 U.S.C. § 1129(a)(11) ................................................................................................... 22, 31, 32 11 U.S.C. § 1129(a)(12) ................................................................................................................ 32 11 U.S.C. § 1129(a)(13) ............................................................................................................... 32 11 U.S.C. § 1129(a)(14) ............................................................................................................... 33 11 U.S.C. § 1129(a)(15) ............................................................................................................... 33 11 U.S.C. § 1129(a)(16) ......................................................................................................... 33, 34 11 U.S.C. § 1129(b) ................................................................................................... 19, 30, 34, 35 11 U.S.C. § 1129(b)(1) ................................................................................................................. 34 11 U.S.C. § 1129(b)(2)(C) ............................................................................................................ 35 11 U.S.C. § 1129(c) ...................................................................................................................... 36 11 U.S.C. § 1129(d) ...................................................................................................................... 36 11 U.S.C. §§ 101-1532 ................................................................................................................... 1 28 U.S.C. § 1930 ........................................................................................................................... 32 28 U.S.C. § 1930(a)(6) .................................................................................................................. 32 Bankruptcy Rules: Bankruptcy Rule 3016 .................................................................................................................. 36 Bankruptcy Rule 3016(a) .............................................................................................................. 36 Bankruptcy Rule 3016(b) .............................................................................................................. 37 Bankruptcy Rule 3016(c) .............................................................................................................. 37


Intellitravel Media, Inc. d/b/a Budget Travel (the “Debtor”) submits this Memorandum of

Law in Support of Entry of an Order Confirming The First Amended Plan of Liquidation of

Intellitravel Media, Inc. d/b/a Budget Travel Pursuant to Chapter 11 of the Bankruptcy Code

(the “Memorandum of Law”) and respectfully states as follows:

I. PRELIMINARY STATEMENT

1. On July 23, 2014, the Debtor filed the Plan of Liquidation of Intellitravel Media,

Inc. d/b/a Budget Travel Pursuant to Chapter 11 of the Bankruptcy Code (the “Initial Plan”)

[Docket No. 171] and the Disclosure Statement for Plan of Liquidation of Intellitravel Media,

Inc. d/b/a Budget Travel Pursuant to Chapter 11 of the Bankruptcy Code (the “Initial Disclosure

Statement”) [Docket No. 172].

2. Following receipt of comments from various interested parties and the Court, the

Debtor filed the First Amended Plan of Liquidation of Intellitravel Media, Inc. Pursuant to

Chapter 11 of the Bankruptcy Code, dated September 2, 2014 [Docket No. 185] (together with

any subsequent modifications, the “Plan”) and related First Amended Disclosure Statement for

First Amended Plan of Liquidation of Intellitravel Media, Inc. Pursuant to Chapter 11 of the

Bankruptcy Code, dated September 2, 2014 (together with any subsequent modifications, the

“Disclosure Statement”) [Docket No. 187]. The Plan and Disclosure Statement represent the

culmination of substantial efforts by the Debtor to propose a fair and equitable resolution of the

business and legal issues presented in this Chapter 11 case. These efforts have resulted in a plan

of liquidation that provides significant value for the Debtor’s stakeholders.

3. As discussed more fully below, the Debtor submits that the Plan satisfies all

applicable requirements of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (as

amended, the “Bankruptcy Code”), the Federal Rules of Bankruptcy Procedure (the “Bankruptcy


2

Rules”) and the Local Bankruptcy Rules for the Southern District of New York (the “Local

Rules”).

4. The Plan has been accepted by Class 4, the only class entitled to vote on the Plan

in accordance with section 1126 of the Bankruptcy Code. See Certification of Catherine

Nownes-Whitaker of Rust Consulting/Omni Bankruptcy with Respect to Solicitation and

Tabulation of Votes with Respect to the First Amended Plan of Liquidation for Intellitravel

Media, Inc. d/b/a Budget Travel Pursuant to Chapter 11 of the Bankruptcy Code filed

concurrently herewith (the “Voting Certification”) ¶ 11-12. In addition, the Plan is supported by

the Debtor’s sole shareholder and the Official Committee of Unsecured Creditors.

II. BACKGROUND AND OVERVIEW OF THE PLAN

A. Pre-Petition Background and Events Leading to Chapter 11 Case.

(i) Organizational Structure.

5. The Debtor is a corporation organized under the laws of the state of Delaware.

The Debtor was originally incorporated on December 2, 1999 under the name NW Acquisition

Corporation (“NW Acquisition”). On December 15, 1999, by amendment to the certificate of

incorporation of NW Acquisition, the name of the Debtor was changed to Newsweek Budget

Travel, Inc. On January 28, 2010, by amendment to the certificate of incorporation, the name of

the Debtor was changed to Intellitravel Media, Inc.

6. The sole shareholder of the Debtor is BRG Investments, LLC (“BRG”). BRG is

wholly owned by Fletcher International, Ltd. (“FIL”). FIL is a debtor in a Chapter 11 proceeding

encaptioned In re Fletcher International, Ltd., Case No. 12-12796(REG) pending in this Court

(the “FIL Bankruptcy”). Richard J. Davis was the Chapter 11 Trustee of FIL, and since the

effective date of FIL’s confirmed plan of liquidation, the Plan Administrator of FIL, and is the

sole member of the Debtor’s Board of Directors.


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(ii) Nature of the Debtor’s Business.

7. Arthur Frommer’s Budget Travel, a travel magazine, launched in spring 1998 as a

bi-monthly publication produced by editor Arthur Frommer, the founder of the modern travel

guidebook industry, which began with the 1957 publication of Europe on $5 a Day.

8. In 1999, Arthur Frommer’s Budget Travel was sold to Newsweek.

9. In 2009, the Washington Post Co., the parent of Newsweek, sold Arthur

Frommer’s Budget Travel and related properties to BRG Investments, LLC for $1 and

assumption of certain liabilities pursuant to a Stock Purchase Agreement dated December 15,

2009.

10. Prior to the Sale (defined below), the Debtor operated a multi-platform travel

media company.

(iii) The Bankruptcy Case.

11. On December 15, 2012 (the “Petition Date”), an involuntary petition (the

“Petition”) under Chapter 7 of the Bankruptcy Code was filed by petitioning creditors Ryan

Murphy, Stuart Wald and Amanda Marsalis (collectively, the “Petitioning Creditors”)

commencing the above-captioned bankruptcy case (the “Bankruptcy Case”) in the United States

Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”).

12. On February 5, 2013, an order for relief under Chapter 7 of the Bankruptcy Code

was entered on default.

13. On February 11, 2013, Robert Geltzer was appointed as Chapter 7 trustee

(the “Chapter 7 Trustee”).

14. By order dated March 22, 2013 (the “Conversion Order”), the Chapter 7

bankruptcy case was converted to a case under Chapter 11 of the Bankruptcy Code, effective as

of March 19, 2013 (the “Conversion Date”).


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15. On April 29, 2013, the Office of the United States Trustee appointed an Official

Committee of Unsecured Creditors (the “Creditors’ Committee”) consisting of Post NW, LLC,

Compass Media, Inc. and Shain + Oringer LLC. The Committee selected the law firm of Meyer,

Suozzi, English & Klein, P.C. as its counsel.

(iv) The Sale.

16. On November 26, 2013, the Debtor filed its Motion for Orders Pursuant to

Sections 105(a), 363 and 365 of the Bankruptcy Code and Bankruptcy Rules 2002, 6004 and

6006: (A)(i) Establishing Bidding Procedures and Bid Protections in Connection with the Sale of

Certain of the Assets of the Debtor; (ii) Approving the Form and Manner of Notices, (iii)

Approving the Asset Purchase Agreement Subject to Higher and Better Offers and (iv) Setting a

Sale Hearing Date; and (B)(i) Approving the Sale of Certain Assets of the Debtor Free and Clear

of Liens, Claims and Encumbrances, (ii) Authorizing the Assumption and Assignment of Certain

Unexpired Leases and Executory Contracts; and (iii) Granting Related Relief (the “Sale

Motion”) [Docket No. 111].

17. On December 27, 2013, the Bankruptcy Court entered its Order Establishing

Bidding Procedures and Related Relief Regarding the Sale of Certain of the Debtor’s Assets, and

Notice Thereof (the “Bidding Procedures Order”) [Docket No. 121].

18. Pursuant to the Bidding Procedures Order, the Debtor solicited competing bids

through and including January 29, 2014 (the “Bid Deadline”). Seven Qualified Bids (as defined

by the Bidding Procedures Order) were received by the Bid Deadline.

19. In accordance with the Bidding Procedures Order, the Debtor conducted an

auction (the “Auction”) on February 7, 2014. At the conclusion of the Auction, the Debtor, in

consultation with the Committee, determined that Lonely Planet USA, LLC (the “Successful


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Bidder”) was the highest and best bid, with purchase consideration of (a) $2,400,000 in cash

(nearly five times the amount of the Stalking Horse bid) (b) satisfaction of the Debtor’s

Subscription Liability (as defined in the Sale Motion), and (c) payment of 80% of the Debtor’s

accounts receivable upon collection.

20. At a hearing on February 26, 2014 (the “Sale Hearing”) the Bankruptcy Court

approved the sale to the Successful Bidder. On March 3, 2014, the Bankruptcy Court entered its

Order Authorizing and Approving (I) the Sale of Substantially All of the Debtor’s Assets to

Lonely Planet USA, LLC; (II) The Procedures Governing the Assumption and Assignment of

Contracts; and (III) Related Relief (the “Sale Order”) [Docket No. 143].

21. On March 11, 2014, the sale (“Sale”) closed.

B. The Plan.

22. The Plan provides for the classification of certain classes of Claims1 and Interests

as Impaired or Unimpaired. The classification scheme is set forth in the table below.

Class Type of Claim or Interest Impairment Entitled to Vote N/A Professional Fee Claims Unimpaired No; deemed to accept N/A Administrative Expense Claims (other

than professional fees and expenses) Unimpaired No; deemed to accept

N/A Priority Tax Claims Unimpaired No; deemed to accept 1 Secured Claims Unimpaired No; deemed to accept 2 Non-Tax Priority Claims Unimpaired No; deemed to accept 3 Subscriber Claims Unimpaired No; deemed to accept 4 General Unsecured Claims Impaired Yes 5 Interests Impaired No; deemed to reject

23. Thus, other than claims that are not required to be classified under the Bankruptcy

Code, the Plan provides for four different classes of Claims and one class of Interests.

24. Class 1 (Secured Claims), Class 2 (Non-Tax Priority Claims) and Class 3

(Subscriber Claims) are unimpaired under the Plan (collectively, the “Unimpaired Classes”).

1 Capitalized terms not defined herein shall have the meaning ascribed to them in the Plan.


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The holders of Claims in Class 1, Class 2 and Class 3 are conclusively presumed to have

accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code, and therefore the Debtor

did not solicit their votes.

25. Class 4 is impaired under the Plan. The votes of holders of Claims in Class 4

were solicited. Class 4 voted in favor of the Plan. See Voting Certification ¶ 11-12.

26. Class 5 Interests are impaired under the Plan, and are not to receive or retain any

property under the Plan on account of such Interests. The holders of Class 5 Interests are

therefore presumed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy

Code, and therefore the Debtor did not solicit their votes.

C. The Solicitation of Votes and Noticing of Non-Voting Classes.

27. On July 23, 2014, the Debtor filed its Motion for Entry of an Order Approving (I)

Disclosure Statement, (II) Form and Manner of Notices, (III) Form of Ballots and (IV)

Solicitation Materials and Solicitation Procedures (the “Solicitation Procedures Motion”)

[Docket No. 173].

28. On September 2, 2014, the Court entered its Order Approving (I) Disclosure

Statement, (II) Form and Manner of Notices, (III) Form of Ballots and (IV) Solicitation Materials

and Solicitation Procedures (the “Solicitation Procedures Order”) [Docket No. 184]. By the

Solicitation Procedures Order, the Bankruptcy Court, inter alia, approved the Disclosure

Statement as containing adequate information sufficient for a reasonable hypothetical investor to

make an informed judgment about the Plan.

29. On September 5, 2014, the Debtor commenced its solicitation (the “Solicitation”)

of votes on the Plan by mailing to the members of Class 4, a package containing (a) the

Disclosure Statement; (b) the Plan; (c) the Solicitation Procedures Order; (d) the Confirmation

Hearing Notice (as defined in the Solicitation Procedures Motion); (e) a letter from the Creditors’


7

Committee recommending that holders of Class 4 General Unsecured Claims vote in favor of the

Plan; (f) a customized ballot; (g) an Internal Revenue Service Form W-9; and (h) a self-

addressed, stamped envelope. See Certificate of Service of Catherine Nownes-Whitaker, sworn

to on September 8, 2014 (the “Solicitation CoS”) [Docket No. 190] ¶ 2.

30. In addition, as required by the Solicitation Procedures Order, on September 5,

2014, holders of unclassified claims and Class 1, Class 2 and Class 3 claims were mailed a

package containing (a) the Confirmation Hearing Notice; (b) the Notice of Non-Voting Status for

Class 1, Class 2 and Class 3, as applicable, substantially in the form annexed to the Solicitation

Procedures Motion as Exhibit C; and (c) an Internal Revenue Service Form W-9. See Solicitation

CoS ¶ 2. Further, holders of Class 5 Interests were mailed a package containing (a) the

Confirmation Hearing Notice; and (b) the Notice of Non-Voting Status for Class 5, substantially

in the form annexed to the Solicitation Procedures Motion as Exhibit D. See Solicitation CoS ¶

2.

31. As provided in the Solicitation Procedures Order, the deadline to vote on the Plan

was set for October 3, 2014.

32. As discussed in greater detail below, the only class entitled to vote (Class 4) voted

to accept the Plan. See Voting Certification ¶ 11-12. Specifically, holders of Class 4 claims voted

as follows:

CLASS ACCEPT THE PLAN REJECT THE PLAN

Dollar Amount Voted/ Percentage of Total Dollar Amount

Number of Votes/ Percentage of Number of Votes



4 $4,785,194.72/100% 50/100% $0/0% 0/0%


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33. If the vote of BRG Investments, LLC on account of its allowed Class 4 General

Unsecured Claim is excluded because of its insider status, Class 4 still voted in favor of the Plan,

as follows:

CLASS ACCEPT THE PLAN REJECT THE PLAN





4 $2,985,194.72/100% 49/100% $0/0% 0/0%

34. The Bankruptcy Court scheduled the Confirmation Hearing for 11:00 a.m. on

October 14, 2014 and set an objection deadline of October 3, 2014. Notice of the dates and times

for the Confirmation hearing and objection deadline was included in the Confirmation Hearing

Notice (as defined in the Solicitation Procedures Motion). No objections to confirmation of the

Plan were filed or received by the Debtor. See Friedfeld Declaration ¶ 5.

III. THE PLAN SHOULD BE CONFIRMED

35. The applicable case law holds that when considering confirmation of a chapter 11

plan, creditor democracy, an integral element in a chapter 11 case, should be afforded substantial

deference in the absence of a clear impediment to plan confirmation. See, e.g., Williams v.

Hibernia Nat’l Bank (In re Williams), 850 F.2d 250, 253 (5th Cir. 1988). Further, the United

States Supreme Court has emphasized that creditors should be permitted to decide whether the

proposed plan treatment is in their best interests. See Norwest Bank Worthington v. Ahlers, 485

U.S. 197, 207 (1988); see also Coltex Loop Central Three Partners, L.P. v. BT/SAP Pool C

Assocs, L.P. (In re Coltex Loop Central Three Partners, L.P.), 138 F.3d 39, 44 (2d Cir.

1998)(“The Code thus strikes a considered balance between creditor and debtor interests, which

… courts must scrupulously respect.”). In this case, every creditor that voted in Class 4 accepted

the Plan, and the creditors’ choice should be given appropriate deference.


9

36. However, the Court has an independent duty to ensure that the Plan satisfies each

of the requirements of section 1129 of the Bankruptcy Code.

37. The Debtor, as proponent of the Plan, bears the burden of proof on all elements

necessary for confirmation. See, e.g., 3 COLLIER BANKRUPTCY MANUAL ¶ 1129.02[4], at 1129 –

6 (3d ed. revised 2005); see also In re Adelphia Communications Corp., 368 B.R. 140, 252

(Bankr. S.D.N.Y. 2007) (plan proponent possesses burden to establish the satisfaction of the best

interests test); see also In re WorldCom Inc., 2003 Bankr. LEXIS 1401, *136 (Bankr. S.D.N.Y.

Oct. 31, 2003) (“A debtor, as the proponent of the Plan, bears the burden of proof under section

1129 of the Bankruptcy Code”); see also In re Richard Buick, Inc., 126 B.R. 840, 851 (Bankr.

E.D. Pa. 1991). To meet this burden, the Debtor must demonstrate that the Plan complies with

the provisions of the Bankruptcy Code by a preponderance of the evidence. See, e.g., Heartland

Fed. Sav. & Loan Ass’n v. Briscoe Enters. (In re Briscoe Enters.), 994 F.2d 1160, 1165 (5th Cir.

1993), cert. denied, 510 U.S. 992 (1993) (preponderance of evidence is debtors’ appropriate

standard of proof); see also In re Adelphia Communications Corp., 368 B.R. at 252 (under best

interests test, plan proponent possesses burden to establish its satisfaction by preponderance of

the evidence); see also In re WorldCom Inc., 2003 Bankr. LEXIS 1401 at *136 (debtor must

meet the burden by a preponderance of the evidence under section 1129 of the Bankruptcy

Code); see also Corestates Bank N.A. v. United Chemical Techs., Inc., 202 B.R. 33, 45 (Bankr.

E.D. Pa. 1996) (preponderance of evidence is appropriate standard of proof under “both §

1129(a) and in a cram down”).

38. To confirm the Plan, the Bankruptcy Court must find that both the Plan and the

plan proponent comply with each of the requirements of section 1129(a) of the Bankruptcy


10

Code. See Kane v. Johns-Manville Corp., 843 F.2d 636, 648 (2d Cir. 1988) (plan must comply

with section 1129(a) requirements).

39. As further described herein, and as established by the Friedfeld Declaration and

the Voting Certification, the Debtor has satisfied its burden, by at least a preponderance of the

evidence, that all of the requirements of the Bankruptcy Code, the Bankruptcy Rules and the

Local Bankruptcy Rules have been satisfied. Accordingly, the Debtor respectfully submits that

the Plan should be confirmed.

A. The Plan Complies With The Applicable Provisions Of Title 11 (Section 1129(a)(l))

40. Section 1129(a)(1) of the Bankruptcy Code provides that a plan may be confirmed

only if “[t]he plan complies with the applicable provisions of this title.” 11 U.S.C. § 1129(a)(1).

41. The legislative history of section 1129(a)(1) explains that this provision embodies

the requirements of, among others, sections 1122 and 1123 of the Bankruptcy Code governing,

respectively, the classification of claims and the contents of the plan. H.R. Rep. No. 595, 95th

Cong., 1st Sess. 412 (1977); S. Rep. No. 989, 95th Cong., 2d Sess. 126 (1978); see also Kane v.

Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636, 648 – 49 (2d Cir. 1988) (“the

legislative history of subsection 1129(a)(1) suggests that Congress intended the phrase

‘applicable provisions’ in this subsection to mean provisions of Chapter 11 that concern the form

and content of reorganization plans”); In re WorldCom Inc., 2003 Bankr. LEXIS 1401 at *137

(“the legislative history of section 1129(a)(1) explains that this provision encompasses the

requirement of section 1122 and 1123 governing classification of claims and contents of a plan,

respectively”); In re Drexel Burnham Lambert Group Inc., 139 B.R. 723, 727 (Bankr. S.D.N.Y.

1992) (same); In re Texaco Inc., 84 B.R. 893, 905 (Bankr. S.D.N.Y. 1988) (“In determining


11

whether a plan complies with section 1129(a)(1), reference must be made to Code §§ 1122 and

1123 with respect to the classification of claims and the contents of a plan of reorganization”).

42. Section 1122 of the Bankruptcy Code provides:

(a) Except as provided in subsection (b) of this section, a plan may place a claim or an interest in a particular class only if such claim or interest is substantially similar to the other claims or interests of such class.

(b) A plan may designate a separate class of claims consisting only of every unsecured claim that is less than or reduced to an amount that the court approves as reasonable and necessary for administrative convenience.

11 U.S.C. § 1122.

43. The relevant inquiry under section 1122(a) is whether all claims in a class have

substantially similar rights to the Debtor’s assets. Thus, a plan proponent has significant

flexibility in classifying claims under section 1122, as long as a reasonable legal and/or factual

basis exists for the proposed classifications, and all claims within a particular class are

substantially similar. See, e.g., In re Jersey City Med. Center, 817 F.2d 1055, 1060 – 61 (3d Cir.

1987) (“Congress intended to afford bankruptcy judges broad discretion [pursuant to section

1122] to decide the propriety of plans in light of the facts”); In re Holywell Corp., 913 F.2d 873,

880 (11th Cir. 1990) (proponent of plan has considerable discretion in classifying claims and

interests according to relevant facts and circumstance of case); Teamster’s Nat’l Freight Indus.

Negotiating Comm. v. U.S. Truck Co. (In re U.S. Truck Co.), 800 F.2d 581, 586 (6th Cir. 1986)

(noting court’s “broad discretion” to determine proper classifications).

44. In addition to Professional Fee Claims, Administrative Expense Claims (other

than professional fees and expenses) and Priority Tax Claims, which need not be designated

pursuant to section 1123(a)(1) of the Bankruptcy Code, the Plan designates four (4) classes of

Claims and one (1) class of Interests. The Claims and Interests placed in each Class are


12

substantially similar to other Claims and Interests, as the case may be, in each such Class. Class

1 includes only Secured Claims. Class 2 includes only Non-Tax Priority Claims. Class 3 includes

only Subscriber Claims. Class 4 includes only General Unsecured Claims. Class 5 includes only

Interests.

45. Valid business, factual, and legal reasons exist for separately classifying the

various Classes of Claims and Interests created under the Plan, and such Classes do not unfairly

discriminate between holders of Claims and Interests in any particular class. The Debtor

respectfully submits that classification scheme in the Plan satisfies section 1122 of the

Bankruptcy Code.

46. Section 1123(a) of the Bankruptcy Code identifies seven (7) required contents of

a plan. The Plan fully complies with section 1123(a).

i. The Plan Designates Classes Of Claims And Interests

47. Section 1123(a)(1) of the Bankruptcy Code requires that a chapter 11 plan

designate classes of claims and interests other than claims of a kind specified in section 507(a)(2)

of the Bankruptcy Code (administrative expense claims), section 507(a)(3) of the Bankruptcy

Code (claims arising during the “gap” period in an involuntary bankruptcy case), and section

507(a)(8) of the Bankruptcy Code (priority tax claims). 11 U.S.C. § 1123(a)(1). Article 3 of the

Plan satisfies this requirement by expressly classifying all Claims and Interests, other than

Professional Fee Claims, Administrative Expenses Claims (other than professional fees and

expenses) and Priority Tax Claims as follows: Class 1 – Secured Claims, Class 2 – Non-Tax

Priority Claims, Class 3 – Subscriber Claims, Class 4 –General Unsecured Claims, and Class 5 –

Interests. Therefore, the Debtor respectfully submits that section 1123(a)(1) of the Bankruptcy

Code is satisfied.


13

ii. The Plan Identifies Unimpaired Classes Of Claims And Interests

48. Section 1123(a)(2) of Bankruptcy Code requires that a plan “specify any class of

claims or interests that is not impaired under the plan.” 11 U.S.C. § 1123(a)(2). Article 3 of the

Plan satisfies this requirement by specifying that Class 1, Class 2 and Class 3 are Unimpaired

under the Plan.

iii. The Plan Specifies The Treatment Of Impaired Classes

49. Section 1123(a)(3) of the Bankruptcy Code requires that a plan “specify the

treatment of any class of claims or interests that is impaired under the plan.” 11 U.S.C. §

1123(a)(3). Article 3 of the Plan specifies that Classes 4 and 5 are impaired under the Plan and

Article 4 of the Plan specifies the treatment of the Claims in Class 4 and the Interests in Class 5.

Accordingly, section 1123(a)(3) of the Bankruptcy Code is satisfied.

iv. The Plan Provides The Same Treatment Within Each Class

50. Section 1123(a)(4) of the Bankruptcy Code requires that a plan “provide the same

treatment for each claim or interest of a particular class.” 11 U.S.C. § 1123(a)(4). Article 4 of

the Plan satisfies this requirement by providing the same treatment to each Claim or Interest in

each respective Class. There is no provision in the Plan to the contrary. Accordingly, section

1123(a)(4) of the Bankruptcy Code is satisfied.

v. The Plan Provides Adequate Means For Implementation

51. Section 1123(a)(5) of the Bankruptcy Code requires that a plan provide “adequate

means” for its implementation. 11 U.S.C. § 1123(a)(5). Adequate means for implementation of a

plan may include, inter alia, retention by the debtor of all or part of its property and the transfer

of property of the estate to one or more entities. See generally, In re Spiegel, Inc., No. 03-11540,

2005 LEXIS 1113 (Bankr. S.D.N.Y. May 25, 2005).


14

52. Article 5 of the Plan provides adequate and proper means for the implementation

of the Plan. In particular, section 5.1 of the Plan provides for the establishment of the Unsecured

Creditor Fund, an Administrative Reserve, and a Disputed Claims Reserve, all of which will be

used to fund distributions pursuant to, and the administration of, the Plan. Section 5.2 of the

Plan establishes the method and timing for distributions under the Plan. Article 5 of the Plan

also provides for various other procedural and administrative mechanisms that will govern the

implementation of the Plan. In addition, Article 9 of the Plan provides procedures related to

distributions, resolution of disputed claims, the means by which distributions will be transmitted,

and the respective responsibilities of the Debtor and recipients of distributions with respect to tax

reporting and withholding. The Debtor submits that the foregoing constitute more than adequate

means for implementation of the Plan, and therefore section 1123(a)(5) of the Bankruptcy Code

is satisfied.

vi. Prohibition On The Issuance Of Non-Voting Securities

53. Section 1123(a)(6) of the Bankruptcy Code requires that a debtor’s corporate

documents prohibit the issuance of non-voting equity securities and related corporate governance

matters. 11 U.S.C. §1123(a)(6). The Plan does not contemplate the issuance of new stock in the

Debtor. Accordingly, I believe section 1123(a)(6) of the Bankruptcy Code does not apply herein.

vii. Selection Of Trustees, Member And Manager

54. Section 1123(a)(7) of the Bankruptcy Code requires that a plan “contain only

provisions that are consistent with the interests of creditors and equity security holders and with

public policy with respect to the manner of selection of any officer, director, or trustee under the

plan,” 11 U.S.C. § 1123(a)(7). This provision is supplemented by section 1129(a)(5) of the

Bankruptcy Code, which directs the Bankruptcy Court to scrutinize the methods by which the


15

management of a reorganized corporation is to be chosen to provide adequate representation of

those whose investments are involved in the bankruptcy – i.e., creditors and equity holders. See 7

Collier on Bankruptcy ¶1123.01[7] (Alan N. Resnick & Henry J. Sommer, eds. 16th ed. 2010).

As described above, the Debtor does not currently, and will have no continued operations

following confirmation of the Plan. No new officers or directors are appointed under the Plan,

nor is it expected that any new officers or directors will be appointed following confirmation of

the Plan. The Debtor will continue in existence in its current form to implement the Plan. The

Debtor therefore respectfully submit that section 1123(a)(7) of the Bankruptcy Code is not

applicable.

55. Section 1123(b) of the Bankruptcy Code identifies various discretionary

provisions that may be included in a plan, but are not required. For example, a plan may impair

or leave unimpaired any class of claims or interests and provide for the assumption or rejection

of executory contracts and unexpired leases. 11 U.S.C. § 1123(b)(1), (2). A plan also may

provide for: (a) “the settlement or adjustment of any claim or interest belonging to the debtor or

to the estate;” (b) “the retention and enforcement by the debtor, by the trustee, or by a

representative of the estate appointed for such purpose, of any such claim or interest;” or (c) “the

sale of all or substantially all of the property of the estate, and the distribution of the proceeds of

such sale among holders of claims or interests.” 11 U.S.C. §§ 1123(b)(3)(A)-(B), 1123(b)(4).

Finally, a plan may “modify the rights of holders of secured claims ... or ... unsecured claims, or

leave unaffected the rights of holders of any class of claims” and may “include any other

appropriate provision not inconsistent with the applicable provisions of [Title 11].” 11 U.S.C.

§§1123(b)(5)-(6).


16

viii. Impairment and Non-Impairment of Claims and Interests

56. Section 1123(b)(1) provides that a plan may “impair or leave unimpaired any

class of claims, secured or unsecured, or of interests.” 11 U.S.C. § 1123(b)(1).

57. The Plan provides that Class 1 Secured Claims, Class 2 Non-Tax Priority Claims,

and Class 3 Subscriber Claims are unimpaired, and Class 4 General Unsecured Claims and Class

5 Interests are impaired. See Plan, Article 4. The Debtor respectfully submits that such treatment

is permissible under section 1123(b)(1).

ix. Executory Contracts and Unexpired Leases

58. Section 1123(b) of the Bankruptcy Code also provides that a plan may, subject to

section 365 of the Bankruptcy Code, provide for the assumption, rejection, or assignment of any

executory contract or unexpired lease of the debtor not previously rejected under such section. 11

U.S.C. § 1123(b)(2).

59. The Plan constitutes a motion under section 365(a) of the Bankruptcy Code for

the authorization to reject executory contracts and unexpired leases not previously assumed,

assigned or rejected. Section 365(a) of the Bankruptcy Code states that a debtor, “subject to the

court’s approval, may assume or reject any executory contract or unexpired lease of the debtor”

if such action represents a reasonable exercise of its business judgment. 11 U.S.C. § 365(a). If

the Court finds a debtor’s business judgment has been reasonably exercised, it approves the

proposed rejection. See N.L.R.B. v. Bildisco & Bildisco, 465 U.S. 513, 523 (1984); In re

Celestial Homes, Inc., 108 B.R. 36, 46 (Bankr. S.D.N.Y. 1989). Under the business judgment

standard, courts will approve a debtor’s business decision unless that judgment is the product of

bad faith, whim, or caprice. See Lubrizol Enters. v. Richmond Metal Finishers, 756 F.2d 1043,

1047 (4th Cir. 1985).


17

60. The Plan provides that any and all prepetition leases and executory contracts (not

otherwise previously assumed, assigned or rejected or the subject of a motion to assume, assign

or reject pending on the Confirmation Date), shall be deemed rejected by the Debtor. See Plan, §

6.1. The Debtor respectfully submits that the provisions of the Plan regarding the treatment of

executory contracts and unexpired leases are fair and reasonable under the circumstances, and

comply with sections 365(a) and 1123(b) of the Bankruptcy Code.

x. Settlements and Retention of Claims

61. Section 1123(b) of the Bankruptcy Code provides that a plan may provide for (a)

the settlement or adjustment of any claim or interest belonging to the debtor or to the estate; or

(b) the retention and enforcement by the debtor, by the trustee, or by a representative of the

estate appointed for such purpose, of any such claim or interest. 11 U.S.C. § 1123(b)(3).

62. Substantially all non-insider causes of action were assigned to LPUSA pursuant to

the LPUSA APA. Accordingly, section 1123(b)(3) of the Bankruptcy Code is not applicable. See

Plan §11.1(d).

xi. Sale of Property and Distribution of Proceeds

63. Section 1123(b)(4) of the Bankruptcy Code provides that a plan may provide “for

the sale of substantially all of the property of the estate, and the distribution of the proceeds of

such sale among holders of claims or interests.” 11 U.S.C. § 1123(b)(4).

64. The Plan does not provide for the sale of any property of the estate. Accordingly,

section 1123(b)(4) of the Bankruptcy Code is not applicable.

xii. Modification of Rights of Holders of Secured Claims and Unsecured Claims

65. Section 1123(b)(5) provides that a plan may “modify the rights of holders of

secured claims, other than a claim secured only by a security interest in real property that is the


18

debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of

holders of any class of claims.” 11 U.S.C. § 1123(b)(5).

66. The Plan does not modify the rights of holders of secured claims (Class 2). See

Plan § 4.2. The Plan does modify the rights of holders of unsecured claims, see Plan § 4.4, and

the rights of holders of interests, see Plan § 4.5. The Debtor submits that the modification of such

rights is consistent with section 1123(b)(5) of the Bankruptcy Code.

xiii. The Plan Includes Other Provisions That Are Not Inconsistent With Applicable Sections Of The Bankruptcy Code

67. Section 1123(b)(6) of the Bankruptcy Code provides that a Plan may “include any

other appropriate provision not inconsistent with the applicable provisions of this title.” 11

U.S.C. § 1123(b)(6). The Plan does provide additional appropriate provisions that are not

inconsistent with applicable sections of the Bankruptcy Code, including, but not limited to: (i)

Plan § 5.1 (the establishment of reserves and funds); (ii) Plan §5.8 (automatic dissolution of

Debtor upon closing of case); (iii) Plan § 8.1 (injunctions against interference with

consummation or implementation of Plan); (iv) Plan § 8.4 (exculpation of the Debtor and the

Creditors’ Committee for any act or omission in connection with the Plan); and (v) Plan § 9.11

(no distributions of less than twenty-five dollars). These provisions are consistent with the

Bankruptcy Code, and thus, the Plan complies with section 1123(b) of the Bankruptcy Code.

68. Section 1123(c) of the Bankruptcy Code requires in a case involving an

individual, that “a plan proposed by an entity other than the debtor may not provide for the use,

sale, or lease of property exempted under section 522 of this title, unless the debtor consents to

such use, sale or lease.” 11 U.S.C. § 1123(c). The Debtor is not an individual, and accordingly,

section 1123(c) does not apply to this Chapter 11 Case.


19

69. Section 1123(d) of the Bankruptcy Code provides that “[n]otwithstanding

subsection (a) of this section and sections 506(b), 1129(a)(7), and 1129(b) of this title, if it is

proposed in a plan to cure a default the amount necessary to cure the default shall be determined

in accordance with the underlying agreement and applicable nonbankruptcy law.” The Plan does

not contemplate the curing of any default. Accordingly, section 1123(d) does not apply to this

Bankruptcy. In any event, the Plan does not contain any provision to the contrary.

70. Based upon the foregoing, the Debtor respectfully submits that the Plan complies

with the applicable provisions sections 1122 and 1123 of the Bankruptcy Code and, therefore,

meets the requirements of section 1129(a)(1) of the Bankruptcy Code.

B. The Debtor Has Complied With The Applicable Provisions Of Title 11 (Section 1129(a)(2))

71. Section 1129(a)(2) of the Bankruptcy Code requires that the plan proponent

“compl[y] with the applicable provisions of [title 11 of the Bankruptcy Code].” 11 U.S.C. §

1129(a)(2). The principal purpose of section 1129(a)(2) is to ensure that a plan proponent has

complied with the requirements of sections 1125 and 1126 of the Bankruptcy Code. See In re

WorldCom, Inc., No. 02-13533 (AJG), 2003 LEXIS 1401, *137 (Bankr. S.D.N.Y. Oct. 31, 2003)

(“The legislative history to section 1129(a)(2) reflects that this provision is intended to

encompass the disclosure and solicitation requirements under sections 1125 and 1126 of the

Bankruptcy Code.”).

72. As noted above, this Court has approved the Disclosure Statement, as amended,

pursuant to section 1125 of the Bankruptcy Code as containing “adequate information” of a kind

and in sufficient detail to enable hypothetical reasonable investors typical of the Debtor’s

creditors to make an informed judgment whether to accept or reject the Plan. In addition, this

Court approved the Debtor’s proposed form and manner of notice of the Confirmation Hearing in


20

the Solicitation Procedures Order. As set forth in the Solicitation CoS and the Voting

Certification, the Debtor fully complied with the requirements of the Solicitation Procedures

Order. See Solication CoS, Voting Certification.

73. Section 1126 of the Bankruptcy Code specifies the requirements for acceptance of

a plan of reorganization. Under section 1126, only holders of allowed claims and allowed equity

interests in impaired classes of claims or equity interests that will receive or retain property

under a plan on account of such claims or equity interests may vote to accept or reject such plan.

See 11 U.S.C. § 1126.

74. As set forth in the Solicitation CoS, in accordance with section 1126 of the

Bankruptcy Code, the Debtor solicited votes from holders of Claims in Class 4 only. See

Solicitation CoS ¶ 2. Class 4 is impaired under the Plan and will receive distributions under the

Plan. See Plan §§ 3.2, 4.4. Accordingly, pursuant to section 1126(a), holders of Claims in such

class were entitled to vote to accept or reject the Plan.

75. Class 1 (Secured Claims), Class 2 (Non-Tax Priority Claims) and Class 3

(Subscriber Claims) are unimpaired under the Plan. See Plan §§ 3.2, 4.1, 4.2 and 4.3. As a result,

pursuant to section 1126(f), holders of Claims in such Classes are conclusively presumed to have

accepted the Plan. As such, the votes of holders of Class 1, Class 2 and Class 3 claims were not

solicited.

76. Holders of Class 5 Interests will not receive any distributions or retain any

property interests under the Plan. See Plan §§ 3.2, 4.5 and 5.10. As a result, pursuant to

Bankruptcy Code section 1126(g), holders of Class 5 Interests are deemed to have rejected the

Plan. Votes were thus not solicited from the holders of Class 5 Interests.


21

77. Based upon the foregoing, the Debtor respectfully submits that the requirements

of section 1129(a)(2) of the Bankruptcy Code have been satisfied.

C. The Plan Was Proposed In Good Faith (Section 1129(a)(3))

78. Section 1129(a)(3) of the Bankruptcy Code requires that a plan be “proposed in

good faith and not by any means forbidden by law,” 11 U.S.C. § 1129(a)(3). Courts within the

Second Circuit have defined the good faith standard to require “a showing that the plan was

proposed with ‘honesty, good intentions’ and with a basis for expecting that a reorganization can

be effected.” In re Granite Broadcasting Corp., 369 B.R. 120, 128 (Bankr. S.D.N.Y. 2007) (“The

Second Circuit has construed the standard as requiring a showing that "the plan [was] proposed

with honesty and good intentions and with a basis for expecting that a reorganization can be

effected”); The Argo Fund Ltd. v. Bd. of Dirs. Of Telecom Argentina, S.A. (In re Bd. of Dirs. Of

Telecom Argentina, S.A.), 2008 U.S. App. LEXIS 11397, * 30 (2d Cir. May 29, 2008) (citing In

re Koelbl, 751 F.2d 137, 139 (2d Cir. 1984)); see also In re Johns-Manville Corp., 843 F.2d at

649. In the context of a chapter 11 plan, courts have held that “a plan is proposed in good faith ‘if

there is a likelihood that the plan will achieve a result consistent with the standards prescribed

under the [Bankruptcy] Code.’” In re The Leslie Fay Co., Inc., 207 B.R. 764, 781 (Bankr.

S.D.N.Y. 1997) (quoting In re Texaco Inc., 84 B.R. at 907). Good faith is to be determined “in

light of the totality of the circumstances surrounding” formulation of the plan. Public Finance

Corp. v. Freeman (In re Public Finance Corp), 712 F.2d 219, 221 (5th Cir. 1983); see also In re

Texas Extrusion Corp., 844 F.2d 1142, 1160 (5th Cir. 1988), cert. denied, 488 U.S. 926 (1988);

see also In re Oneida Ltd., 351 B.R. 79, 85 (Bankr. S.D.N.Y. 2006) (“Good faith should be

evaluated in light of the totality of the circumstances surrounding confirmation.”); In re Lionel

L.L.C., 2008 Bankr. LEXIS 1047, *15—16 (Bankr. S.D.N.Y. March 31, 2008) (looking to

totality of the circumstances in order to determine a plan proposed in good faith under section


22

1129(a)(3)). In determining whether the good faith requirement has been satisfied, the court will

focus on “the plan itself and whether such plan will fairly achieve a result consistent with the

objectives and purposes of the Bankruptcy Code.” In re Granite Broad. Corp., 369 B.R. 120, 128

(Bankr. S.D.N.Y. 2007) (quoting In re Plus Holding Corp., 228 F.3d 224, 242 (3d Cir. 2000)).

Accordingly, bankruptcy courts have held that the good faith requirement is satisfied if the plan

has been proposed for the purpose of preserving the value of the bankruptcy estate and

distributing that value to creditors. In re Source Enters, Inc., No. 06-11707, 2007 LEXIS 4996,

at *16 (Bankr. S.D.N.Y. Oct. 1, 2007) (the good faith requirement was satisfied in plan filed with

the legitimate and honest purposes of maximizing value of estate and effectuating equitable

distribution), aff’d, 392 B.R. 541 (S.D.N.Y. 2008).

79. Liquidation is specifically allowed in a chapter 11 plan pursuant to section

1129(a)(11) of the Bankruptcy Code. See In re Deer Park, Inc., 136 B.R. 815, 818 (9th Cir.

B.A.P. 1992) (“Had Congress not intended to include liquidation as an acceptable type of

reorganization plan, then presumably all provisions dealing with liquidation would fall within

Chapter 7, which is specifically titled ‘Liquidation’”).

80. The Plan has been proposed by the Debtor in good faith, with the legitimate and

honest purpose of maximizing the value of the Debtor’s estate. See Friedfeld Declaration ¶ ___.

In addition, the Plan is the product of negotiations between the Debtor, BRG and the Creditors’

Committee. The Debtor submits that the Plan maximizes value and that there is no alternative to

the Plan that would return greater value to creditors. See Friedfeld Declaration ¶ 31.

81. Further, the support of the Debtor’s primary constituencies and the acceptance of

the Plan by the only voting class reflects the overall fairness of the Plan and the acknowledgment

by the voting class that the Plan has been proposed in good faith and for proper purposes.


23

Accordingly, the Debtor respectfully submits that section 1129(a)(3) of the Bankruptcy Code is

satisfied.

D. All Payments To Be Made By The Estate In Connection With This Case Are Subject To The Approval Of The Court (Section 1129(a)(4))

82. Section 1129(a)(4) of the Bankruptcy Code requires that: “[a]ny payment made or

to be made by the proponent, by the debtor, or by a person issuing securities or acquiring

property under the plan, for services or for costs and expenses in or in connection with the case,

or in connection with the plan and incident to the case, has been approved by, or is subject to the

approval of, the court as reasonable.” 11 U.S.C. § 1129(a)(4). In essence, this subsection

requires that any and all fees promised or received from the estate in connection with or in

contemplation of a chapter 11 case must be disclosed and made subject to the court’s approval.

See In re Johns-Manville Corp., 68 B.R. 618, 632 (Bankr. S.D.N.Y. 1986) (implying that court

must be permitted to review and approve reasonableness of professional fees made from estate

assets). See In re Elsinore Shore Assocs., 91 B.R. 238, 268 (Bankr. D. N.J. 1988) (the

requirements of section 1129(a)(4) were satisfied where the plan provided for payment of only

“allowed” administrative expenses).

83. In this case, the only such payments are to the Debtor’s retained professionals and

to the Creditors’ Committee’s retained professionals. The Plan requires such persons to file final

applications for allowance of professional fees and reimbursement of expenses within 30 days of

the Effective Date of the Plan. See Plan §5.5. Only allowed claims of such persons and

professionals will be paid. Furthermore, section 11.1 of the Plan provides that the Bankruptcy

Court will retain jurisdiction after the Effective Date to hear and determine all applications for

professional fees.


24

84. Accordingly, Debtor respectfully submits that the Plan complies with the

requirements of section 1129(a)(4) of the Bankruptcy Code.

E. Disclosure Of All Required Information Regarding Post-Confirmation Directors, Management And Insiders (Section 1129(a)(5))

85. Section 1129(a)(5)(A)(i) requires that the proponent of a plan disclose the identity

and affiliations of any individual proposed to serve, after confirmation of a plan, as director,

officer or voting trustee of the debtor, an affiliate of the debtor participating in a joint plan with

the debtor, or a successor to the debtor under the Plan.

86. The Plan satisfies section 1129(a)(5)(A)(i). The Plan does not provide for the

appointment of any new director, officer or voting trustee after confirmation of the Plan. The

Responsible Officer appointed herein will remain in said office to implement the Plan. The Plan

contemplates that the Debtor will continue in existence until the closing of the Bankruptcy Case,

and as such, there is no successor to the Debtor. See Plan § 5.8. The Plan relates solely to the

Debtor and not to any other person or entity. Thus, the Debtor respectfully submits that the Plan

satisfies the requirements of section 1129(a)(5)(A)(i).

87. Section 1129(a)(5)(A)(ii) requires the appointment of the person identified in

accordance with section 1129(a)(5)(A)(i) “is consistent with the interests of creditors and equity

security holders and with public policy.” 11 U.S.C. § 1129(a)(5)(A)(ii). Thus, section

1129(a)(5)(A)(ii) asks the bankruptcy court to ensure that post-confirmation governance is in

“good hands,” which has been interpreted by courts to mean that, without limitation: (a) the

proposed directors and officers have experience in the debtor’s business and industry and in

financial and management matters; (b) control of the reorganized entity by the proposed

individuals will be beneficial; and (c) the appointment of such persons does not “perpetuate

incompetence, lack of discretion, inexperience, or affiliation with groups inimical to the best


25

interests of the debtor.” See, e.g., In re Drexel Burnham Lambert Grp, Inc., 138 B.R. at 760

(citations omitted).

88. To the extent the Responsible Officer’s continuation in his office is implicated by

section 1129(a)(5)(A)(ii), the Debtor believes that his appointment is in fact consistent with the

interests of creditors and equity security holders and with public policy. As set forth in the

Friedfeld Declaration, the Responsible Officer has previously served in similar roles, including

as Executive Vice President, Chief Restructuring Officer and General Counsel of a large,

privately held, high-end international wholesale jewelry company, as Executive Vice President,

Chief Restructuring Officer, General Counsel and Responsible Officer of Tender Loving Care

Health Care Services, Inc. (Bankr. E.D.N.Y., Case No. 02-88020(SB)), as member of the Special

Situations Committee of Coudert Brothers LLP (Bankr. S.D.N.Y, Case No. 06-12226(RDD)),

and as Responsible Officer of Piquant, LLC d/b/a Air America Radio (Bankr. S.D.N.Y. Case No.

06-12423(RDD)). Through this service, he has gained substantial experience in debt

restructuring and plan negotiation and implementation, among other areas. Accordingly, the

Debtor believes that he is qualified to implement the Plan, and that his experience demonstrates

that his appointment is in the best interests of creditors, equity security holders, and public

policy. Therefore, the Debtor believes that the Responsible Officer’s appointment satisfies the

requirements of section 1129(a)(5)(A)(ii) of the Bankruptcy Code, to the extent it is applicable.

See Friedfeld Declaration ¶ 35.

89. Section 1129(a)(5)(B) of the Bankruptcy Code provides that a plan may be

confirmed if the proponent discloses the identity of any insider that will be employed or retained

by the reorganized debtor, and the nature of any compensation for such insider. 11 U.S.C. §


26

1129(a)(5)(B). No insider is to be employed or retained under the Plan. Accordingly, section

1129(a)(5)(B) is satisfied.

F. The Plan Does Not Provide For Any Rate Change Subject To Regulatory Approval (Section 1129(a)(6))

90. Section 1129(a)(6) of the Bankruptcy Code requires, with respect to a debtor

whose rates are subject to governmental regulation following confirmation, that appropriate

governmental approval has been obtained for any rate change provided for in the plan, or that

such rate change be expressly conditioned on such approval. 11 U.S.C. §1129(a)(6). Section

1129(a)(6) of the Bankruptcy Code does not apply to the Plan as there is no governmental

regulatory commission that has jurisdiction over any rates of the Debtor.

G. The Plan Satisfies The “Best Interests” Test (Section 1129(a)(7))

91. The “best interests of creditors” test as set forth in section 1129(a)(7) of the

Bankruptcy Code requires that, with respect to each impaired class of claims or interests, each

holder of a claim or interest has accepted the plan or will receive property of a value not less than

what such holder would receive if the debtor were liquidated under chapter 7. See In re Leslie

Fay Cos., 207 B.R. 764, 787 (Bankr. S.D.N.Y. 1997).

92. The best interests test focuses on individual dissenting creditors rather than

classes of claims. See e.g., In re Drexel Burnham Lambert Group, Inc., 138 B.R. 723, 761

(Bankr. S.D.N.Y. 1992); see also ACC Bondholder Group v. Adelphia Communications Corp.

(In re Adelphia Communications Corp.), 361 B.R. 337, 364 (S.D.N.Y. 1997) (“The best interest

of creditors test applies to individual creditors holding impaired claims, even if the class as a

whole votes to accept the plan. If even one dissenting member of an impaired class would get

less under the Plan than in a hypothetical liquidation, the fact that the class as a whole approved

the Plan is immaterial”). The analysis requires that each holder of a claim or interest either


27

accept the plan or receive or retain under the plan property having a present value, as of the

effective date of the plan, not less than the amount such holder would receive or retain if the

debtor were liquidated under chapter 7 of the Bankruptcy Code. In re Labrum & Doak, LLP,

227 B.R. 372, 381 (Bankr. E.D. Pa. 1998) (the “best interests of creditors” test focuses on

whether creditors would receive at least as much in a chapter 7 distribution of debtor’s assets as

under reorganization plan); In re Best Prods. Co., 168 B.R. 35, 72 (Bankr. S.D.N.Y. 1994) (best

interests test met when classes voting against plan would receive either the same or larger

distribution than under chapter 7 liquidation), appeal dismissed, 177 B.R. 791 (S.D.N.Y.), aff’d,

68 F.3d 26 (2d Cir. 1995); see In re The Leslie Fay Co., Inc., 207 B.R. at 787 (best interests test

requires court to “find that each [dissenting] creditor will receive or retain value that is not less

than the amount he [or she] would receive if the debtor were liquidated”). Accordingly, if the

Court finds that each nonconsenting member of an impaired class will receive at least as much

under the Plan as it would receive in a chapter 7 liquidation, the Plan satisfies the best interests

of creditors test. See In re Century Glove, Inc., No. 90-400,1993 U.S. Dist. LEXIS 2286 (D.

Del. Feb. 10, 1993).

93. The Debtor prepared a liquidation analysis, attached to the Disclosure Statement

as Exhibit B (the “Liquidation Analysis”), to demonstrate that the Plan satisfies the “best

interests” test. See Disclosure Statement, Exhibit B.

94. The Liquidation Analysis in fact demonstrates that a liquidation of the Debtor

under chapter 7 of the Bankruptcy Code would result in reduced recoveries due to, among other

things: (a) the additional costs and expenses involved in the appointment of a chapter 7 trustee

and retention of chapter 7 trustee counsel and financial advisors in a chapter 7 case; and (b)


28

additional time involved in effectuating distributions in a chapter 7 case. See Friedfeld

Declaration ¶¶ 40-41.

95. As shown by the Liquidation Analysis, the holders of Claims and Interests in the

impaired classes (Class 4 and Class 5) are not receiving or retaining any less value under the

Plan than they would in chapter 7. Accordingly, I believe that the “best interests of creditors”

test is satisfied as to each impaired class of claims and interests because each dissenting holder of

a Claim or Interest in each such Class will receive or retain under the Plan, on account of such

Claim, property of a value, as of the Effective Date of the Plan, that is not less than the amount

that such holder would receive in a chapter 7 liquidation of the Debtor’s assets on such date. In

addition, the docket of the Bankruptcy Case does not reflect an election by any class pursuant to

§ 1111(b)(2) of the Bankruptcy Code. Accordingly, the Plan satisfies the requirements of section

1129(a)(7) of the Bankruptcy Code.

H. Each Impaired Class, Except for Class 5, Has Voted to Accept the Plan (Section 1129(a)(8))

96. Section 1129(a)(8) of the Bankruptcy Code requires that each class of claims or

interests under a plan has either accepted the plan or is not impaired under the plan. 11 U.S.C. §

1129(a)(8). With respect to an unimpaired class of claims, under section 1126 of the Bankruptcy

Code, such unimpaired class of claims is “conclusively presumed” to have accepted the plan and

need not be further examined under section 1129(a)(8). 11 U.S.C. § 1126(f). Thus, the

Unimpaired Classes are presumed to have accepted the Plan.

97. With respect to an impaired class of claims, acceptance of a plan is determined by

reference to section 1126(c) of the Bankruptcy Code, which identifies the members of a class

who may vote and the number and amount of votes necessary for the acceptance of a plan by a

class of claims or interests. In particular, section 1126(c) of the Bankruptcy Code provides that a


29

plan is accepted by an impaired class of claims if the class members accepting hold at least two-

thirds in amount and more than one-half in number of the claims held by the class members that

have cast votes on the plan. 11 U.S.C. § 1126(c).

98. As set forth in the Voting Certification, Class 4 voted unanimously to accept the

Plan. Of the votes counted in accordance with the Solicitation Procedures Order, 50 votes, or

100% of the votes cast, were cast to accept the Plan. Those votes represent $4,785194.72 in

amount, or 100% of the dollar amount of the votes that were counted. Zero (0) votes were cast to

reject the Plan. See Voting Certification ¶ 11.

99. If the allowed general unsecured claim of BRG Investments LLC is excluded

because of its insider status, Class 4 still voted to accept the Plan. Not including the vote of

BRG, 49 votes, or 100% of the votes cast, were cast to accept the Plan. Those votes represent

$2,985,194.72 in dollar amount of the votes that were counted. See Voting Certification ¶ 12.

100. Section 1126(g) of the Bankruptcy Code provides: “[n]otwithstanding any other

provision of this section, a class is deemed not to have accepted a plan if such plan provides that

the claims or interests of such class do not entitle the holders of such claims or interests to

receive or retain any property under the plan on account of such claims or interests.” 11 U.S.C.

1126(g).

101. Pursuant to section 1126(g) of the Bankruptcy Code, Class 5 is deemed not to

have accepted the Plan2.

102. Because of the deemed rejection of Class 5, the Plan fails to satisfy section

1129(a)(8). However, the Plan may still be confirmed over the deemed rejection of Class 5,

2 In fact, BRG, the sole member of Class 5, supports the Plan, and has informed the Debtor that if it was entitled to vote, it would vote to accept the Plan.


30

pursuant to section 1129(b) of the Bankruptcy Code (as described in more detail below) because

the Plan does not discriminate unfairly and is fair and equitable with respect to Class 5.

I. The Plan Provides For The Payment Of Priority Claims (Section 1129(a)(9))

103. Section 1129(a)(9) of the Bankruptcy Code requires that certain priority claims be

paid in full on the effective date of a plan. The Plan satisfies each of the requirements of section

1129(a)(9). First, consistent with section 1129(a)(9)(A), the Plan provides for all Allowed

Administrative Claims (i.e., § 507(a)(2) and § 507(a)(3) claims) to be paid in full in Cash as

soon as practicable after the later of (i) the Effective Date and (ii) the date on which such Claim

becomes an Allowed Administrative Claim, or upon such other terms as may be agreed to by the

holder of such Allowed Administrative Claim, or (b) such lesser amount as the holder of such

Allowed Administrative Claim might otherwise agree. See Plan § 2.2.

104. Second, with respect to priority claims under sections 507(a)(1)3, 507(a)(4),

507(a)(5), 507(a)(6) or 507(a)(7), the Plan provides for payment of such Non-Tax Priority

Claims as soon as practicable after the later of (i) the Effective Date and (ii) the date on which

such Claim becomes an Allowed Claim, or upon such other terms as may be agreed to by the

holder of such Allowed, or (b) such lesser amount as the holder of such Allowed Non-Tax

Priority Claim might otherwise agree. See Plan § 4.2.

105. Third, the Plan provides that Priority Tax Claims will be treated consistently with

section 1129(a)(9)(C), in that each holder of an Allowed Priority Tax Claim shall be paid the full

3 All allowed commissions payable to Robert Geltzer, the Chapter 7 Trustee appointed in the Bankruptcy Case prior to the Conversion Date, and the allowed fees and expenses of his retained professionals, Squire Sanders (US) LLP and Davis, Graber, Plotzker & Ward LLP were paid pursuant to the Corrected Order Granting (I) Application of the Chapter 7 Trustee, Robert L. Geltzer for Approval of First and Final Allowance of Commission and Reimbursement of Expenses, (II) Application of Squire Sanders (US) LLP for Approval of First and Final Allowance of Fees and Reimbursement of Expenses as Special Counsel for the Trustee, and (III) Application of Davis Graber Plotzker & Ward for Approval of First and Final Allowance of Fees and Reimbursement of Expenses as Accountant to the Trustee [Docket No. 69]. Accordingly, claims entitled to priority under section 507(a)(1)(C) have been satisfied and are not addressed in the Plan.


31

amount thereof, without post-Petition Date interest or penalty, in Cash, as soon as practicable

after the later of (i) the Effective Date and (ii) the date on which such Claim becomes an

Allowed Claim or upon such other terms as may be agreed upon by the holder of such Allowed

Priority Tax Claim. See Plan § 2.4.

106. Thus, the Plan complies with the requirements of section 1129(a)(9) of the

Bankruptcy Code.

J. The Plan Has Been Accepted By At Least One Impaired, Non-Insider Class (Section 1129(a)(10))

107. Section 1129(a)(10) of the Bankruptcy Code provides that “[i]f a class of claims

is impaired under the plan, at least one class of claims that is impaired under the plan has

accepted the plan, determined without including any acceptance of the plan by any insider”. 11

U.S.C. § 1129(a)(10).

108. The Plan satisfies this requirement. As described above and in the Voting

Certification, the Plan has been accepted by Class 4, the only impaired Class entitled to vote on

the Plan. If the vote of BRG Investments, LLC on account of its allowed general unsecured

claim is excluded, Class 4 still voted in favor of the Plan. As a result, at least one Class of Claims

that is Impaired under the Plan has accepted the Plan, determined without including any

acceptance of the Plan by any insider, as required by section 1129(a)(10) of the Bankruptcy

Code.

K. The Plan Is Feasible or Feasibility Analysis Not Applicable (Section 1129(a)(11))

109. Pursuant to section 1129(a)(11) of the Bankruptcy Code, a plan may be confirmed

only if “[c]onfirmation of the plan is not likely to be followed by the liquidation, or the need for

further financial reorganization, of the debtor or any successor to the debtor under the plan,

unless such liquidation or reorganization is proposed in the plan.” 11 U.S.C. § 1129(a)(11).


32

110. Substantially all of the Debtor’s assets were sold or otherwise liquidated prior to

proposal of the Plan. As a result, the requirements of section 1129(a)(11) are not applicable.

However, to the extent Bankruptcy Code section 1129(a)(11) applies to implementation of the

Plan, the Debtor submits that the feasibility requirement of section 1129(a)(11) is satisfied,

because the Debtor’s estate has sufficient assets on hand to implement the Plan as proposed. See

Liquidation Analysis.

L. The Plan Provides For The Payment Of Certain Fees (Section 1129(a)(12))

111. Section 1129(a)(12) of the Bankruptcy Code requires that certain fees listed in 28

U.S.C. § 1930, determined by the court at the hearing on confirmation of a plan, be paid or that

provision be made for their payment. 11 U.S.C. § 1129(a)(12). The Plan provides that all fees

payable pursuant to section 1930 of title 28 of the United States Code shall be paid on the

Effective Date (if any are due) by the Debtor’s estate. The Debtor will pay when due all United

States Trustee quarterly fees under 28 U.S.C. § 1930(a)(6) from the Effective Date until the

Bankruptcy Case is closed. See Plan, section 5.9.

M. Preservation of Retiree Benefits.

112. Section 1129(a)(13) of the Bankruptcy Code requires that a plan provide for the

continuation, after the plan’s effective date, of all retiree benefits at the level established by

agreement or by court order pursuant to section 1114 of the Bankruptcy Code at any time prior to

confirmation of the plan, for the duration of the period that the debtor has obligated itself to

provide such benefits.

113. The Debtor has no obligation to provide any retiree benefits, and accordingly,

section 1129(a)(13) of the Bankruptcy Code does not apply.


33

N. Domestic Support Obligations.

114. Section 1129(a)(14) of the Bankruptcy Code requires a debtor to pay all domestic

support obligations that first become payable after the date of the filing of the petition.

115. The Debtor does not have any domestic support obligations, and accordingly,

section 1129(a)(4) of the Bankruptcy Code does not apply.

O. Requirements for Individual Chapter 11 Cases Not Applicable.

116. Section 1129(a)(15) of the Bankruptcy Code provides that in a case where the

debtor is an individual and in which the holder of an allowed unsecured claim objects to the

confirmation of the plan, either (a) the value, as of the effective date of the plan, of the property

to be distributed under the plan on account of such claim is not less than the amount of such

claim, or (b) the value of the property to be distributed under the plan is not less than the

projected disposable income of the debtor as defined by section 1325(b)(2) to be received during

the 5-year period beginning on the date that the first payment is due under the plan, or during the

period for which the plan provides payments, whichever is longer.

117. The Debtor is not an individual, and accordingly, section 1129(a)(15) of the

Bankruptcy Code does not apply.

P. Property Transfers By Corporations or Trusts that are not Moneyed, Business or Commercial Corporations or Trusts.

118. Section 1129(a)(16) of the Bankruptcy Code requires that “all transfers of

property under the plan shall be made in accordance with any applicable provisions of

nonbankruptcy law that govern the transfer of property by a corporation or trust that is not a

moneyed, business or commercial corporation or trust.” 11 U.S.C. § 1129(a)(16).


34

119. The Debtor is not a corporation or trust that is not a moneyed, business or

commercial corporation or trust. Accordingly, section 1129(a)(16) of the Bankruptcy Code does

not apply.

Q. Fair and Equitable; No Unfair Discrimination (Section 1129(b))

120. Section 1129(b)(1) of the Bankruptcy Code provides that, “if all of the applicable

requirements of subsection (a) of this section other than paragraph (8) are met with respect to a

plan, the court, on request of the proponent under the plan, shall confirm the plan

notwithstanding the requirements of such paragraph if the plan does not discriminate unfairly,

and is fair and equitable, with respect to each class of claims or interests that is impaired under,

and has not accepted, the plan.” 11 U.S.C. § 1129(b)(1).

121. Thus, the Plan may be confirmed if, in addition to satisfying the other

requirements for confirmation, the Plan is determined to be “fair and equitable” and “does not

discriminate unfairly” with respect to each class of Claims or Interests that has not accepted the

Plan. Under the Plan, the holders of Interests in Class 5 are deemed to reject the Plan, and

accordingly the Court may only confirm the Plan if the Plan “does not discriminate unfairly” and

is “fair and equitable” with respect to Class 5. See 11 U.S.C. § 1129(b).

i. The Plan Does Not Discriminate Unfairly With Respect to Rejecting Classes

122. The Plan does not discriminate unfairly with respect to Class 5. Although

Congress did not define “discriminate unfairly” in the Bankruptcy Code, courts have interpreted

this standard to mean that creditors or interest holders with similar legal rights should not receive

materially different treatment under a proposed plan. See, e.g., In re Johns-Manville Corp., 68

B.R. at 636). The test for whether the discrimination is unfair “boils down to whether the

proposed discrimination has a reasonable basis and is necessary for reorganization.” See 3


35

Collier Bankruptcy Manual ¶ 1129.04[3][a] at 1129-41 (3rd ed. revised 2005), citing, In re 203

North LaSalle St. Ltd. P’ship, 190 B.R. 567, 585-86 (Bankr. N.D. Ill. 1995) (“Firstly, any

discrimination must be supported ... by a legally acceptable rationale. . . . Second, the extent of

the discrimination must be necessary in light of the rationale”).

123. In accordance with the foregoing standards, the Plan does not “discriminate

unfairly” with respect to Class 5. The Interests in Class 5 are not similarly situated to Claims in

any other class. Class 5 is comprised solely of BRG Investment LLC’s stock in the Debtor.

ii. The Plan is Fair and Equitable With Respect to Rejecting Classes

124. In addition to not discriminating unfairly, the Plan must be fair and equitable with

respect to Class 5. See Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 202 (1988) (“fair

and equitable” means that a plan must “comply with the absolute priority rule”); In re

Montgomery Ct Apartments of Ingham County, Ltd., 141 B.R. 324, 343 (Bankr. S.D. Ohio

1992) (fair and equitable standard means that “[holders] of junior claims or interests cannot

receive distributions under a proposed plan unless senior creditors have been fully paid”).

Section 1129(b) of the Bankruptcy Code provides explicit guidance as to the meaning of “fair

and equitable.”

125. With respect to equity interests, “fair and equitable” means that each equity

interest holder (a) will receive or retain property of a value, as of the effective date of the Plan,

equal to the greatest of (i) the allowed amount of any fixed liquidation preference to which such

holder is entitled, (ii) any fixed redemption price to which such holder is entitled, or (iii) the

value of such interest; or (b) the holder of any interest that is junior to the interests of such class

will not receive or retain any property under the Plan on account of such junior interest. See 11

U.S.C. § 1129(b)(2)(C).


36

126. Under the Plan, Class 5 is deemed to reject the Plan. However, the Plan can be

confirmed over the deemed rejection of Class 5 because (i) no class junior to Class 5 is receiving

or retaining any property under the Plan, (ii) no class of equal rank to Class 5 is being afforded

better treatment than Class 5 and (iii) the Interests held by Class 5 are valueless. Accordingly,

the Plan does not discriminate unfairly as to any impaired Class of Claims or Interests and is fair

and equitable with respect to each such Class.

R. Confirmation of One Plan (11 U.S.C. § 1129(c)).

127. The Plan is the only plan that has been filed in this Chapter 11 Case. Accordingly,

section 1129(c) of the Bankruptcy Code is satisfied.

S. The Principal Purpose of the Plan is Not Avoidance of Taxes or Section 5 of the Securities Act (11 U.S.C. § 1129(d))

128. Section 1129(d) of the Bankruptcy Code states that “the court may not confirm a

plan if the principal purpose of the plan is the avoidance of taxes or the avoidance of the

application of section 5 of the Securities Act of 1933.” 11 U.S.C. § 1129(d). The purpose of the

Plan is not to avoid taxes or the application of section 5 of the Securities Act of 1933. Moreover,

no party that is a governmental unit, or any other entity, has requested that the Court decline to

confirm the Plan on the grounds that the principal purpose of the Plan is the avoidance of taxes

or the avoidance of the application of section 5 of the Securities Act of 1933. Accordingly, the

Plan satisfies the requirements of section 1129(d) of the Bankruptcy Code.

T. Compliance with Bankruptcy Rule 3016.

129. Bankruptcy Rule 3016(a) requires that “[e]very proposed plan and any

modification thereof shall be dated and, in a chapter 11 case, identified with the name of the

entity or entity submitting or filing it. This requirement is satisfied because the Plan is dated, as

of September 2, 2014, and the Plan identifies the Debtor as the party filing it.


37

130. Bankruptcy Rule 3016(b) requires that a disclosure statement be filed with the

plan or within a time fixed by the Court. The Debtor satisfied this requirement by filing the

Disclosure Statement contemporaneously with the Plan.

131. Bankruptcy Rule 3016(c) requires that “[i]f a plan provides for an injunction

against conduct not otherwise enjoined under the Code, the plan and disclosure statement shall

describe in specific and conspicuous language (bold, italic or underlined text) all acts to be

enjoined and identify the entities that would be subject to the injunction.” Article 8 of the Plan

provides for certain injunctions and exculpations, which are specifically and conspicuously

identified by the use of bold typeface. Accordingly, the Plan complies with Bankruptcy Rule

3016(c).


38

CONCLUSION

Based upon the foregoing, the Debtor respectfully submits that (i) the Plan satisfies all of

the applicable requirements of the Bankruptcy Code, the Bankruptcy Rules and the Local

Bankruptcy Rules; and (ii) the Debtor, as plan proponent, has satisfied the applicable

requirements of the Bankruptcy Code, the Bankruptcy Rules and the Local Bankruptcy Rules.

According, for all of these reasons the Debtor respectfully requests that the Court enter an order

confirming the Plan.

Dated: New York, New York October 6, 2014

KLESTADT & WINTERS, LLP By:__/s/ Tracy L. Klestadt_______ Tracy L. Klestadt Joseph C. Corneau 570 Seventh Avenue, 17th Floor, New York, New York 10018 Tel: (212) 972-3000 Fax: (212) 972-2245 Attorneys for Debtor and Debtor in Possession


Documents

12-14815-alg Doc 194 Filed 10/06/14 Entered 10/06/14 11:42 ... · case no. 12-14815(alg) memorandum of law in support of entry of an order confirming the first amended plan of liquidation