United States: Bankruptcy Litigation

Last Updated: February 5 2013

Milbank negotiates global multi-party settlement that forms the basis for NewPage's chapter 11 reorganization plan

NewPage, the largest manufacturer of coated paper in North America, filed for bankruptcy protection in September 2011. Milbank represented the Indenture Trustee for the First Lien Noteholders. In 2009, the First Lien Noteholders loaned $1.77 billion to NewPage to refinance a $1.6 billion term loan. The refinanced term loan had been part of a 2007 transaction in which NewPage acquired the North American paper business of Stora Enso Oyj, including mills in the U.S. and Canada.

Early in the chapter 11 case, it became apparent that the value of NewPage's assets was insufficient to repay even its secured creditors in full. In May 2012, the Official Committee of Unsecured Creditors sought standing to bring several avoidance actions, including against the First Lien Noteholders. The Committee advanced a host of novel theories of fraudulent transfer liability stemming from the 2007 acquisition. The Committee was denied standing, and the fraudulent transfer claims were resolved in court-ordered mediation. In a two-day mediation, we successfully negotiated a global settlement with the Committee, the Debtors and other parties-in-interest that resolved the Committee's potential avoidance actions. The settlement also resolved disputes among the parties about valuation and entitlement to certain unencumbered assets of NewPage. The global settlement forms the basis of the chapter 11 plan of reorganization filed by NewPage in October 2012. If the plan is confirmed, the First Lien Noteholders will receive all of the equity in the reorganized company plus several million dollars in cash distributions.

Representing Refco's bankruptcy trustee, Milbank's litigation successes help creditors recoup almost 100% of their losses

In October 2005, only months after its IPO, Refco, a financial services company specializing in commodities and futures contracts, collapsed suddenly. Following its collapse, several of Refco's high-level officers were prosecuted on criminal charges relating to a massive accounting fraud that concealed the company's true financial condition. On behalf of the trustee appointed in Refco's bankruptcy proceeding, Milbank filed a civil complaint against these officers and other company insiders to recover more than $450 million in fraudulent transfers and preferential payments that Refco made to them prior to its collapse.

After filing the lawsuit, we began negotiating settlements with the defendants while simultaneously responding to motions to dismiss the complaint. Milbank achieved the latest of its successful settlements in October 2012 and has now reached favorable settlements with 10 different defendants, resulting in significant additional recoveries for Refco's creditors. Refco's creditors, on behalf of whom these lawsuits were filed, have now recovered almost all of their original losses.

Milbank's aggressive litigation and financial restructuring strategy leads to confirmation of reorganization plan for the Silver Legacy debtors

Milbank represented debtors Circus and Eldorado Joint Venture and its subsidiary, Silver Legacy Capital Corp., in connection with a debt restructuring and successful confirmation of a chapter 11 reorganization plan. The Joint Venture owned by Eldorado Resorts, LLC and MGM Resorts International is the owner and operator of the Silver Legacy Resort Casino, a 19th century silver-mining-themed hotel, casino and entertainment complex in Reno, Nevada. In 2011, following the worldwide recession, a dramatic decline in the Reno gaming market, and an influx of Native American gaming, the Joint Venture retained Milbank to assist with restructuring, reorganization and recapitalization of debtors' mortgage notes, of which $142,800,000 were then outstanding and scheduled to mature on March 1, 2012.

Extensive efforts to refinance the mortgage notes proved unsuccessful and, in May 2012, we filed voluntary petitions, commencing chapter 11 cases in the U.S. Bankruptcy Court for the District of Nevada. We also filed a proposed plan of reorganization and related motions. The debtors' plan of reorganization was hotly contested by Black Diamond Capital Management, L.L.C., a noteholder with sufficient interest to block a consensual treatment of the plan and force an alternative "cramdown" scenario.

Milbank litigators executed a fast-track litigation timetable under which extensive document discovery, several discovery motions and more than ten depositions took place in a matter of weeks. In the midst of the discovery battles, Black Diamond filed a motion seeking to terminate the debtors' exclusivity period and incorporating the terms of Black Diamond's proposed alternative plan. We opposed the motion and sought, among other things, to designate the vote of Black Diamond for violating the debtors' exclusivity period by promoting an alternative plan without the court's consent. In September 2012, in a rare move, the bankruptcy court ruled in favor of the debtors, designating Black Diamond's vote and awarding the debtors' attorney's fees.

Milbank's aggressive litigation and financial restructuring strategy ultimately led to settlement discussions with Black Diamond on the eve of the confirmation hearing. The debtors' plan of reorganization was approved by the bankruptcy court in October 2012.

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