Creditors' Rights and Bankruptcy

Kasowitz’s creditors’ rights and bankruptcy practice has been highly rated by Chambers USA and other national organizations and publications, and is one of the leading creditors’ rights groups in the country.  The firm is recognized for its creative and aggressive representation of investors in securities of distressed companies, including hedge funds that see opportunity in troubled companies poised for a turnaround, and represents those funds which typically acquire significant positions in an enterprise’s capital structure, in order to influence the direction of its reorganization.  The firm has extensive experience in the most sophisticated litigations arising out of bankruptcy cases, including valuation trials.  The firm also represents companies of all types and sizes when they are in financial distress, working closely with the clients and their financial advisors to develop and implement creative legal strategies for their financial rehabilitation.

Some of the firm’s high-profile bankruptcy representations include:

• Borders Group, Inc.: In 2011, Kasowitz was counsel to the debtors and debtors in possession in the New York bankruptcy cases of Borders Group, Inc. and its affiliated debtors.  Borders was a leading operator of book, music and movie superstores and mall-based bookstores.  As of January 29, 2011, Borders operated 642 stores, under the Borders, Waldenbooks, Borders Express and Borders Outlet names, as well as Borders-branded airport stores in the United States.  Kasowitz filed Borders’ chapter 11 cases on February 16, 2011 in the United States Bankruptcy Court for the Southern District of New York. During the chapter 11 cases, Kasowitz, among other things, obtained court approval of $505 million in post-petition financing and approval of two agency agreements with third party liquidators to conduct going out of business sales at all of the debtors’ store locations.  Further, on September 14, 2011, Kasowitz held a successful auction and sold many of Borders’ most valuable intellectual property assets, primarily to Barnes & Noble, Inc.  The court approved the sale of these assets on September 27, 2011.  On December 20, 2011, the bankruptcy court confirmed Borders’ chapter 11 plan of liquidation.
• Adelphia Communications Corporation:  Kasowitz was counsel to the Official Committee of Unsecured Creditors of Adelphia Communications Corporation and its affiliated debtors and is now counsel to the Adelphia Recovery Trust.  In its capacity as counsel to the Creditors’ Committee, Kasowitz was the architect of Adelphia’s chapter 11 plan and prosecuted confirmation thereof and also advised the Creditors’ Committee and participated extensively in the sale of Adelphia’s assets to Time Warner NY Cable LLC and Comcast for in excess of $17 billion, among the largest M&A transactions ever completed in bankruptcy.  On behalf of the Adelphia Recovery Trust, a publicly traded liquidating trust, Kasowitz has prosecuted actions against numerous commercial banks and their investment bank affiliates, alleging, among other things, that such institutions assisted Adelphia’s management, led by the Rigas family, in looting funds from the company.  The action was recently settled for $175 million.  Kasowitz also continues to litigate a variety of fraudulent transfer claims against other parties on behalf of the Trust.
• Tribune Company:  Kasowitz represents the indenture trustee for 18% of the total outstanding senior notes issued by Tribune in the chapter 11 cases of Tribune Company.  The focus of the representation is the leveraged buy-out transaction entered two years into prior to the commencement of the bankruptcy cases that burdened the company with more than $11 billion of additional debt. Kasowitz is simultaneously working closely with the Creditors’ Committee and independently to ensure a thorough and complete investigation of all aspects of the transaction and to determine whether potential claims should be brought on behalf of the Debtors’ estates to enhance the recovery to unsecured creditors, including Tribune Company’s bondholders.  Kasowitz is also working with the Debtors and other interested parties to resolve these potential claims and enable the Debtors to propose a confirmable plan of reorganization.
• Le*Nature’s Liquidation Trustee:  Kasowitz was retained to oversee and prosecute the actions that arose from the bankruptcy cases of Le*Nature’s and two of its subsidiaries.  The chapter 11 bankruptcy cases lead to the establishment of a litigation trust, and the Trustee is the plaintiff in several separate actions, against, among others, Wachovia, BDO Seidman, CIT, and Krones AG, a major German manufacturer, for, among other things, each of their participation and substantial assistance in Le*Nature's Ponzi scheme fraud.  In these actions, the firm asserted more than 20 separate causes of action, including RICO, fraud, aiding and abetting, and malpractice seeking more than $500 million in damages that trebles under RICO law to more than $1.5 billion in damages.  The firm defeated all of the federal and arbitral motions to dismiss, protectively expanding the law on the gate keeping issue of in pari delicto for litigation trustees in the multi-district litigation that includes Wachovia, Krones and CIT, and in the BDO Arbitration’s motion to dismiss.  The court upheld 25 of the 26 claims, and confirmed that Wachovia and the other defendants could be held liable for all of the money raised and lost in the Ponzi scheme.
• Trump Entertainment Resorts, Inc.:  Kasowitz was counsel to Donald J. Trump and Ivanka Trump in the chapter 11 bankruptcy cases of Trump Entertainment Resorts, Inc. (TER) and its affiliates.  TER owns and operates the Taj Mahal, Trump Plaza, and Trump Marina casinos in Atlantic City, New Jersey.  Kasowitz was actively involved, on behalf of the Trumps, in all aspects of the cases, including an extensive confirmation fight with competing chapter 11 plans that resulted in a victory for the Trumps on April 12, 2010, when the bankruptcy court confirmed the plan backed by Mr. Trump.
• Smurfit-Stone Container Corporation:  Kasowitz is counsel to certain common stockholders of Smurfit-Stone Container Corporation, the second-largest containerboard producer in North America.  Kasowitz’s representation focuses primarily on opposing confirmation of the Debtors’ proposed chapter 11 plan of reorganization that seeks to wipe out common stock.  As one of two leading opponents to confirmation, Kasowitz, on behalf of its clients, participated in extensive discovery and a multi-week valuation trial involving eight testifying experts and several fact witnesses.
• Lyondell Chemical Company:  Kasowitz acted as counsel to the Wilmington Trust Company in its capacity as indenture trustee for holders of $1.3 billion in subordinated notes issued by the predecessor of LyondellBasell Industries in connection with the chapter 11 cases of Lyondell and its debtor affiliates.  Kasowitz successfully negotiated a settlement of litigation with Lyondell and its banks over the enforceability of the subordination provisions of the indenture and related documents.  Pursuant to the settlement, Lyondell and the banks agreed to waive enforcement of the subordination provisions, with the result that the holders of the subordinated notes will share equally in all recoveries received by general unsecured creditors, including a $450 million settlement of fraudulent transfer claims against Lyondell’s banks. 
• Lehman Brothers Holdings Inc.:  Kasowitz has been retained as special counsel to Lehman Brothers Holdings Inc. and its affiliated debtors to represent such debtors in connection with an investigation and possible prosecution of certain litigation against parties that may have interfered with or damaged the debtors’ business.
• Hawkeye Renewables, LLC:  Kasowitz acted as counsel for the agent for Hawkeye’s second lien lenders.  Hawkeye is a leading ethanol producer that filed for chapter 11 relief in December 2009.  The Hawkeye debtors and the first lien lender group agreed to a pre-packaged chapter 11 plan that initially valued the company at approximately $210 million.  Based on such valuation, junior claims would be rendered worthless, as such claims would not be eligible to receive any recoveries unless the company’s value was at least $580 million.  Kasowitz objected to the plan and contested the valuation.  After a valuation hearing, the parties negotiated a settlement providing a recovery to the second lien lenders.
• Merisant Worldwide Inc.:  Kasowitz acted as counsel to Nomura Corporate Research & Asset Management, Inc., on behalf of its investment funds and certain managed accounts, holder of in excess of 11% of the 9½% Senior Subordinated Notes issued by Merisant Company, in connection with the chapter 11 cases of Merisant Worldwide and its debtor affiliates.  Pursuant to Merisant’s proposed plan of reorganization, the subordinated noteholders were to receive a grossly unfair distribution.  Kasowitz successfully negotiated a settlement whereby the holders of the subordinated notes received a significantly improved distribution under the plan of reorganization. 
• Linens ‘n Things, Inc.:  Kasowitz is counsel to an ad hoc group of holders of Linens ‘n Things’ $650 million Senior Secured Floating Rate Notes due 2014, that holds substantially all of such notes.  Prior to winding-down operations, Linens ‘n Things operated in excess of 500 stores located throughout the United States and Canada.  Kasowitz represented the noteholders in the chapter 11 case and is currently representing the noteholders in the chapter 7 case liquidation, including with respect to cash collateral usage and monetizing remaining assets.
• Anderson News LLC:  Kasowitz is counsel to the company in its chapter 11 case in the United States Bankruptcy Court for the District of Delaware. Anderson News, LLC was part of a family of companies that comprised the second largest wholesaler of books and magazines in the United States.  On March 2, 2009, certain petitioning creditors filed an involuntary petition under chapter 7 of the United States Bankruptcy Code against the company.  After a two-day hearing, the bankruptcy court converted the case into a voluntary case under chapter 11 of the Bankruptcy Code.  In the bankruptcy case, Kasowitz has secured debtor-in-possession financing on favorable terms and has filed and defended various other administrative and substantive motions on behalf of the estate.
• Cabi Downtown, LLC:  Kasowitz is counsel to the company in its chapter 11 case. Cabi Downtown, LLC is the developer and owner of Everglades on the Bay, an 800-unit residential condominium development.  This case represents the first significant condominium chapter 11 case in Miami as a result of the recent economic downturn.  Kasowitz has negotiated a consensual plan with Cabi’s lenders that will successfully resolve the bankruptcy for all constituencies.
• Refco, Inc.:  Kasowitz was counsel to the Official Creditors’ Committee and general counsel to the Additional Creditors’ Committee, and is currently counsel to the RCM Plan Administrator, the Refco Plan Administrator and the Refco Liquidating Trust in connection with the wind-down of the Refco chapter 11 estates.  During the chapter 11 cases, Kasowitz was charged with the prosecution and settlement of claims relating to a $1.4 billion leveraged recapitalization and the investigation and prosecution of claims against all underwriters and major financial institutions involved with Refco.  Kasowitz was also involved with prosecution of the confirmed joint chapter 11 plan. 
• Mirant Corporation:  Mirant is an energy company that filed for chapter 11 relief in 2003. In connection with a proposed plan of reorganization, each of the Mirant debtors and two official committees of creditors submitted valuations of the company of approximately $8.5 billion that would render interests in certain subordinated securities worthless.  Kasowitz was retained in early 2005 by substantial holders of the subordinated securities to object to the plan and contest the valuation.  After a 27-day hearing, the bankruptcy court overseeing the case directed that the debtors manage a new process to determine the value of Mirant, including utilizing major adjustments to the valuation methodology asserted by Kasowitz.  Thereafter, Kasowitz played a substantial role in negotiating a global settlement, which included that the holders of the subordinated securities be paid in full, and implied a valuation of the company in excess of $12 billion.
• Tronox Inc.:  Kasowitz is representing the Official Creditors’ Committee in litigation arising out of the spin-off of Tronox by Kerr-McGee.  This includes litigation against Anadarko, which acquired Kerr-McGee soon after the spin-off, as well as a separate action against the lenders that financed the spin-off.
• Broadstripe Inc.:  Kasowitz represented the Official Creditors’ Committee in litigation against a large hedge fund that both owned a majority of Broadstripe’s pre-petition debt and controlled a majority of its equity.  The suit sought to equitably subordinate the claims of the pre-petition lenders based on their participation in mismanagement of the company.  After Kasowitz, on behalf of the Creditors’ Committee, successfully defended against the lenders’ motion seeking summary judgment, the parties agreed to participate in a mediation.  The mediation resulted in a very favorable settlement that funded distributions to general unsecured creditors, who likely would have received no value otherwise.