Creditors' Rights and Bankruptcy
Kasowitz’s Creditors’ Rights and Bankruptcy Practice Group is highly rated by Chambers USA and other industry publications as one of the leading bankruptcy groups in the country. We have extensive experience representing parties in all types of out-of-court workouts, restructurings, insolvency and bankruptcy proceedings, and in all related and attendant state and federal court litigations.
Our clients are private equity firms, hedge funds, companies, bondholders, lenders, official and ad hoc committees having a wide range of interests in all aspects and at all levels of an enterprise’s capital structure in distressed situations. We excel at developing highly effective strategies to meet each client’s particular needs and, in those situations where assertive action is appropriate, we capitalize on the group’s and the firm’s well known powerful litigation and trial capabilities.
Notable representations include:
- LightSquared. Kasowitz represents Harbinger Capital Partners LLC (“Harbinger”), an investment fund engaged in the development and operation of an innovative satellite-and-terrestrial wireless-services network worth billions of dollars, through its ownership and control of LightSquared Inc. and its subsidiaries (“LightSquared”). Through its aggressive negotiation and litigation tactics, Kasowitz was able to ensure that Harbinger would continue to own a sizable stake in the reorganized debtors. The recently confirmed plan realizes this goal, providing that Harbinger will own slightly less than 50% of the reorganized company upon emergence. Earlier in the case, Kasowitz filed an adversary complaint against satellite television mogul Charles Ergen (“Ergen”) and his company Dish Network (“Dish”), which, along with certain subsidiaries and affiliates and co-conspirators, perpetrated a fraud to wrest control of LightSquared and its valuable wireless spectrum from Harbinger. The adversary complaint alleges that Ergen and Dish devised a scheme to secretly use a shell company to purchase LightSquared’s debt in contravention of provisions in a credit agreement that prevented them, as competitors of LightSquared, from holding the debt. The defendants then blocked Harbinger from forming a plan of reorganization that would have repaid Harbinger and all of the creditors, while seeking to force a sale of assets to themselves.
- Residential Capital LLC. Kasowitz currently represents Federal Housing Finance Agency (“FHFA”) as Conservator for the Federal Home Loan Mortgage Corporation in the bankruptcy cases of Residential Capital, LLC and its debtor affiliates (the “ResCap Cases”), pending in the United States Bankruptcy Court for the Southern District of New York. Prior to the commencement of the ResCap Cases, FHFA commenced an action styled Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation v. Ally Financial Inc. f/k/a GMAC, LLC et al. (referred to herein as the “FHFA Case”), which is currently pending in the District Court for the Southern District of New York before District Judge Cote. Shortly after the commencement of the ResCap Cases, the debtors commenced an adversary proceeding against numerous parties, including FHFA, seeking to enjoin the prosecution of certain pending litigation, including the FHFA case, against certain affiliated non-debtor entities (the “Injunction Motion”). After FHFA succeeded in withdrawing the reference of the adversary proceeding, on July 9, 2012, Judge Cote denied the Injunction Motion, finding that the anti-injunction provision of the Housing and Economic Recovery Act deprived the District Court jurisdiction to enjoin FHFA from prosecuting the FHFA case against ResCap’s non-debtor affiliates.
- Tribune Company. Kasowitz represented Law Debenture Trust Company of New York, indenture trustee for 18% of the total outstanding senior notes issued by Tribune, in the chapter 11 cases of Tribune Company in the United States Bankruptcy Court for the District of Delaware. The representation focused on potential “state of the art” state law fraudulent conveyance claims related to the approximately $11 billion leveraged buy-out transaction orchestrated by Sam Zell that Tribune entered into less than two years prior to the commencement of the cases. Kasowitz worked throughout the pendency of the almost four-year case to ensure a complete, thorough, investigation of all aspects of the leveraged buyout transaction and ascertained that claims should be brought on behalf of the debtors’ estates to enhance the recovery to unsecured creditors, including Tribune’s bondholders. This effort led to the Official Committee of Unsecured Creditors’ commencement of two separate complaints. Kasowitz continues to prosecute certain of these claims against recipients of fraudulently conveyed assets, including CalPERs against which Kasowitz successfully defeated sovereign immunity defenses.
- Adelphia. Official Committee of Unsecured Creditors of Adelphia Communications Corporation, its affiliated debtors and 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. Kasowitz also advised the Creditors’ Committee and participated extensively in the sale of Adelphia’s assets to Time Warner NY Cable LLC and Comcast 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 settled for $175 million. Kasowitz has continued to represent the Trust including in connection with several claims for intentional and constructive fraudulent conveyances, and aiding and abetting fraud and breach of fiduciary duty, in the litigation, appeal, and mediation contexts.
- Kodak. Holders of secured and unsecured obligations of the debtors Eastman Kodak Company (“Kodak”), in the debtors’ bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York. Initially, Kasowitz worked with the debtors, the Official Committee of Unsecured Creditors, and their respective professionals to negotiate the treatment of general unsecured creditors and ensure that their recovery was maximized. Based on these discussions, Kasowitz determined that a rights offering was the best alternative for its clients and sought out strategic partners for its clients to propose and backstop such a rights offering. Kasowitz, along with the other counsel for the backstop parties, negotiated a backstop commitment agreement to backstop a $406 million rights offering with counsel for the debtors and the Creditors’ Committee. The rights offering ensured payment in full to secured creditors and provided unsecured creditors the opportunity to participate in the rights offering for 85% of the equity of the reorganized Kodak. As a result of Kasowitz’s efforts, its clients own approximately 20% of the equity interests of reorganized Kodak and one of its clients is a member of the new board of directors.
- Relativity Fashion, LLC. Kasowitz is special litigation and conflicts counsel to Relativity Fashion, LLC and its affiliated debtors. Relativity Fashion is a privately-held entertainment company that provides, among other things, film and television financing, production and distribution. Kasowitz was able to prevent premature foreign distribution of one of the Debtors’ films by filing for an emergency preliminary injunction, in which Kasowitz eventually negotiated a consensual resolution. Kasowitz also resolved certain automatic stay issues with a creditor who threatened to take over some of the Debtors’ valuable intellectual property. Kasowitz is currently advising the Debtors on potential breach of fiduciary duty and other claims against some of the Debtors’ largest creditors.
- EFH. Ad Hoc Group of Energy Future Holdings Corp. ("EFH") Legacy Noteholders, in the case stemming from the largest leveraged buyout in history. The group consists of a super-majority of parent-level bonds that were not locked into a deal with the Debtors. Following weeks of intensive discovery and a two-day trial, Kasowitz successfully blocked a $2 billion loan and a restructuring support agreement, which would have transferred substantial value to other parties-in-interest to the detriment of Kasowitz’s clients. As a result, the Debtors eventually proposed a plan that is expected to pay in full Kasowitz’s clients.
- Borders. Borders Group, Inc. (“Borders”) in connection with serving as lead counsel to the debtors and debtors in possession in the bankruptcy cases of Borders and its subsidiaries. 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 Bankruptcy 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, which went effective on January 12, 2012.
- Innkeepers USA Trust. Kasowitz represented a leading real estate investment fund and its related affiliates in the chapter 11 bankruptcy cases of Innkeepers USA Trust and its affiliates. Prior to filing for bankruptcy protection, the debtors owned and operated 72 hotels, consisting of approximately 10,000 rooms, located in 20 states across the country. Kasowitz’s client was the lead post-petition lender for the debtors as well as the largest holder of trust certificates issued by a CMBS trust that held an $825 million mortgage secured by 45 of the debtors’ hotels. Shortly after the bankruptcy filing, the debtors filed a motion seeking approval of a plan-support agreement for a reorganization plan that would have converted all the secured debt of one lender, Lehman ALI, into 100% of the reorganized equity, while cramming down all other secured debt. Kasowitz, on behalf of its client, vigorously opposed the plan-support agreement and succeeded in blocking its approval. Thereafter, Kasowitz’s client, as a stalking horse bidder, was instrumental in implementing a sales process for the entire Innkeepers enterprise, which led to a highly successful auction resulting in a sale price that delivered immense value to all constituents.
- ACA Financial Guaranty Corporation. Kasowitz currently represents ACA Financial Guaranty Corporation in an action against Goldman Sachs & Co. for fraud in connection with the now-notorious CDO known as ABACUS 2007-AC1. In this action, ACA alleges that Goldman structured and marketed ABACUS based on a portfolio of investment securities selected largely by its hedge fund client, Paulson & Co. Inc. ACA further alleges that Goldman fraudulently induced it to provide guaranty insurance for ABACUS by deceiving ACA into believing that Paulson also was to be a long investor in ABACUS when in fact, as Goldman knew, Paulson intended to take an enormous short position in ABACUS, reaping nearly $1 billion when the portfolio failed. The case was recently reinstated on appeal and Kasowitz is presently prosecuting ACA’s claims.
- Capmark. Special litigation counsel to the Official Committee of Unsecured Creditors of Capmark Financial Group, Inc. in the debtors’ Chapter 11 bankruptcy cases in the United States Bankruptcy Court for the District of Delaware, in connection with investigating claims related to the prepetition conversion of $1.5 billion of the debtors’ unsecured bank debt into secured debt. After the debtors emerged from Chapter 11, Kasowitz represented the reorganized company in bringing a $145 million insider preference action against Goldman Sachs entities, which ultimately settled.
- Lyondell Chemical Company. Kasowitz acted as counsel to Wilmington Trust Company in its capacity as indenture trustee for holders of $1.3 billion in subordinated notes issued by the predecessor of Lyondell Basell Industries, in connection with Lyondell’s chapter 11 cases pending in the United States Bankruptcy Court for the Southern District of New York. Kasowitz successfully brought litigation against Lyondell and the leveraged buyout lenders that resulted in a negotiated settlement. Pursuant to the settlement, Lyondell and the banks agreed to waive enforcement of the subordination provisions resulting in the holders of the subordinated notes sharing equally in all recoveries received by general unsecured creditors, including a $450 million settlement of fraudulent transfer claims against Lyondell’s banks. Stemming from the Lyondell leveraged buyout, Kasowitz commenced suit on behalf of several Lyondell subordinated noteholders against their former Indenture Trustee, The Bank of New York Mellon, asserting approximately $1 billion in damages from BNY Mellon’s alleged gross negligence, breach of fiduciary duty and other claims. On February 28, 2012, the Court denied BNY Mellon’s motion to dismiss the complaint, allowing the noteholders’ claims to proceed.
- Dewey. Official Committee of Former Partners of Dewey & LeBoeuf LLP (the “FPC”) in connection with their representation of former partners who held claims against the debtor relating to unpaid pension benefits, severance agreements, employment contracts or other similar arrangements. Kasowitz was involved with all issues in the case including cash collateral, the partner contribution plan (“PCP”), retention issues, and the debtor’s disclosure statement and Chapter 11 plan. Kasowitz led the FPC in objecting to the PCP and at the evidentiary hearing thereon, and negotiated a settlement of the FPC’s claims against the debtor during the FPC’s appeal of the Court’s approval of the PCP.
- 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.
- Ampal. Yosef A. Maiman, the president, chairman of the board and controlling shareholder of Ampal-American Israel Corporation (“Ampal”). Ampal, an Israeli based company that invests primarily in energy, chemical, real estate and project development industries located in the State of Israel, filed bankruptcy in August 2012 in the United States Bankruptcy Court for the Southern District of New York. In March 2013, the Official Committee of Unsecured Creditors sought approval of a stipulation that provided for several corporate governance changes including the appointment of a Creditors’ Committee-selected chief restructuring officer (“CRO”) and two Creditors’ Committee-selected new members of Ampal’s board of directors. Kasowitz, on behalf of Mr. Maiman, objected to the appointment of the directors and CRO because, among other reasons, such appointment was a violation of New York corporate law and Ampal’s corporate documents. In the alternative, Kasowitz argued that in the interest of moving the case forward, the Bankruptcy Court should appoint a Chapter 11 trustee. After a contested evidentiary hearing, the Bankruptcy Court denied the Creditors’ Committee’s proposed corporate governance changes and appointed a Chapter 11 trustee, marking a victory for Kasowitz. The case has subsequently been converted to a Chapter 7 case and a Chapter 7 trustee has been appointed. Kasowitz represents Mr. Maiman in the Chapter 7 proceeding.
- Debtor KIT digital, Inc.’s largest shareholder, JEC Capital Partners, LLC (“JEC”), which led a group of shareholders (the “Plan Sponsor Group”) that proposed and funded the debtor’s reorganization through a sponsored Chapter 11 plan (the “Sponsored Restructuring”). Kasowitz represented JEC in negotiating and obtaining approval of the debtor in possession financing and plan support agreement that enabled the debtor to confirm its plan of reorganization that resulted in the Plan Sponsor Group becoming majority owners of KIT digital, Inc. Kasowitz represents JEC in connection with all aspects of the Chapter 11 case, including responding to certain shareholders’ unsuccessful objections to the Sponsored Restructuring and seeking to ensure that the estate bears only reasonable professional fees and expenses. The plan of reorganization was confirmed on August 7, 2013.
- CIL Limited. Chapter 7 trustee as special counsel to investigate potential claims the debtor has against various parties in connection with the recapitalization of CIL Limited’s former subsidiary CEVA Group, PLC. The potential claims likely are the most valuable asset of the Chapter 7 estate. The investigation is currently ongoing. The debtor’s involuntary Chapter 7 bankruptcy case is pending in the United States District Court for the Southern District of New York.
- TPG Troy. Successful defense of the putative debtors TPG Troy LLC and T3 Troy LLC, dissolved former affiliates of TPG Capital, in involuntary Chapter 7 bankruptcy proceedings brought by SPQR Capital (Cayman) Ltd. and two of its wholly owned subsidiaries (the “Petitioners”) in the United States Bankruptcy Court for the Southern District of New York. The Court granted Kasowitz’s motion to dismiss the involuntary bankruptcies, and awarded over $500,000 in attorneys’ fees and costs incurred defending the petitions.
- Linens ‘n Things. Ad hoc group of holders of Linens ‘n Things’ $650 million Senior Secured Floating Rate Notes due 2014 and 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.
- 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.
- WorldCom, Inc. Kasowitz represented a substantial ad hoc committee of senior bondholders of MCI Corporation. Through a strategy of negotiation with a threat of opposing substantive consolidation, our client obtained a recovery of 80% versus 26% for all other unsecured creditors of the MCI and WorldCom estates.
- Delphi Corporation. Kasowitz was counsel to the controlling block of domestic trade creditors of the principal operating subsidiaries and divisions of Delphi Corporation in Delphi’s chapter 11 cases. Prior to its bankruptcy filing, Delphi was a leading global supplier of mobile electronics and transportation systems for the automotive industry. Kasowitz actively represented the trade creditors to ensure full payment to this class in connection with the debtors’ initial chapter 11 plan.
- Verestar. Kasowitz served as special counsel to the Official Committee of Unsecured Creditors of Verestar and was responsible for prosecuting estate litigation against the Fortune 500 public parent company of Verestar and its directors involving over $150 million in damages for alter ego and breach of fiduciary duty claims. The primary claims against the defendants survived motion to dismiss and the action proceeded to mediation, resulting in favorable settlement for creditors.
- Smurfit-Stone. Common stockholders of Smurfit-Stone Container Corporation, the second-largest containerboard producer in North America. Kasowitz’s representation focused primarily on opposing confirmation of the Debtors’ proposed Chapter 11 plan of reorganization that sought 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.
- 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 (“Hawkeye”). 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 to whom Kasowitz represented.
- Merisant. Merisant Worldwide, Inc. is the maker of Equal and other sweeteners. Pursuant to a deal between Merisant and its senior lender, Merisant proposed a plan of reorganization that would convert its senior lender’s debt into preferred stock, pay select junior creditors in cash, but provide a low recovery for its unsecured noteholders. A large noteholder retained Kasowitz on an emergency basis to object to the plan. Through expedited financial discovery, Kasowitz made a case that the senior creditor was getting an excessive distribution of preferred stock, which led to negotiated amendments to the plan that increased noteholder recoveries.
- Anderson News LLC. in a 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 (“Cabi”). in its Chapter 11 case. Cabi was the developer and owner of Everglades on the Bay, an 800-unit residential condominium development. This case represented the first significant condominium Chapter 11 case in Miami as a result of the economic downturn. Kasowitz successfully fended off various attempts by the bank lender to frustrate the proceedings, including an attempt to dismiss the case and an attempt to halt the company’s residential leasing program. Ultimately, Kasowitz negotiated a successful consensual plan with Cabi’s lenders that resolved the bankruptcy for all constituencies.
- Refco. Official Committee of Unsecured Creditors and general counsel to the Additional Creditors’ Committee, and counsel to the RCM Plan Administrator, the Refco Plan Administrator and the Refco Liquidating Trust in connection with the wind-down of the Refco Inc.’s (“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.
- Tronox. Official Committee of Unsecured Creditors in litigation arising out of the spin-off of Tronox Inc. by Kerr-McGee. This included 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. Official Committee of Unsecured Creditors in litigation against Highland Capital, a large hedge fund that both owned a majority of Broadstripe Inc.’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 mediation. The mediation resulted in a very favorable settlement that funded distributions to general unsecured creditors, who likely would have received no value otherwise.
- 205 East 45 LLC and EALC LLC. properties held by the debtors’ secured lenders in prepackaged Chapter 11 bankruptcy proceedings in the United States Bankruptcy Court for the Southern District of New York. The debtors owned these hotel properties in New York City, which were valued at less than the secured lenders’ claims of over $350 million. Kasowitz successfully negotiated the prepackaged plan of reorganization on behalf of the secured lenders, which maximized the secured lenders’ recovery by granting them ownership of the reorganized debtors.
Chambers USA 2016 Recognizes Kasowitz as a Leading Bankruptcy and Restructuring Law Firm
Chambers USA 2016 has again recognized Kasowitz as a leading Bankruptcy and Restructuring law firm, calling partner David M. Friedman "outstanding" and highlighting partner David S. Rosner as "valued for his knowledge and skill advising financial institutions and hedge fund clients in litigious situations."
Turnaround & WorkoutsNames Daniel Fliman Outstanding Young Restructuring Lawyer
Bankruptcy partner Daniel A. Fliman has been named a 2016 “Outstanding Young Restructuring Lawyer” by Turnaround & Workouts, recognizing lawyers under the age of 40 whose achievements transcend their age. To read more, please click here.
Legal 500 US 2016 Recommends Kasowitz Practice Groups and Attorneys
Legal 500 US 2016 has again recommended Kasowitz, highlighting the firm as providing the most cutting edge and innovative advice to corporate counsel nationwide.