In the recent decision of In re: Abeinsa Holding Inc. et al., Del. Bankr. Ct. Dec. 14, 2016), Case No. 1:16-bk-10790, the Honorable Kevin J. Carey confirmed clean energy developer Abeinsa Holding Inc.'s Chapter 11 plan, which is part of the $16.5 billion global restructuring for Spanish parent Abengoa SA. Abengoa, with operations in about 50 nations, is a major figure in clean energy and environmental sustainability engineering.
The plan was confirmed over the objections of the U.S. Trustee's office, which complained among other things of the liability releases contained in the plan.
The Court agreed with the U.S. Trustee that the liability releases contained in the Chapter 11 plan are broad. However, the Court found that they do not violate the Bankruptcy Code and were necessary, negotiated-for components of the exit strategy. Notably, no creditors objected to the releases, which the Court found to be of significance.
The Court found the liability releases to be the result of extensive bargaining, and essential to the deal in which Abeinsa's parent and other entities would bring in enough new money to make the exit strategy feasible and not cripple a crucial component of Abengoa's multilayered global restructuring strategy.
One key objection from creditor Portland General Electric Co. ("PGE"), which has a litigation claim against Abeinsa for more than $200 million in damages on breach-of-contract claims. PGE's objection dealt with the complex structure of Abeinsa's bankruptcy plan, and a measure that has parent Abengoa retaining ownership of its subsidiary companies that the creditor argues is in violation the Chapter 11 absolute priority rule, which places equity holders at the very bottom when it comes to order of recovery.
Judge Carey overruled PGE's objection, finding that there is an exception to the absolute priority rule when a stakeholder brings new value to the case. The Court found that Abengoa was doing so with a new value contribution of nearly $40 million, part of which will be used for creditor distribution.
Abeinsa's plan, a major component of Abengoa's global restructuring effort, calls for four separate subplans that will liquidate some Abengoa subsidiaries and restructure others with $1 billion in new investment being injected.
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