Mediation

Complex Chapter 11 cases can generate a great deal of litigation on every issue imaginable, ranging from asset values to the priority of competing security interests. Nothing jeopardizes a reorganization’s success more than unpredictable, time-consuming and expensive litigation, and parties are well-advised to consider alternative dispute resolution methods before litigated adversary proceedings take on lives of their own.

Our senior partner, Albert Togut, is an experienced mediator certified by the U.S. Bankruptcy Court for the Southern District of New York and has achieved outstanding results in cases that appeared intractable. Every mediation he has handled has resulted in an agreement.

For example, in the Calpine Chapter 11 case, the creditors and the equity interests had differing views of the debtor corporation’s asset value. The factions were $10 billion apart in a heated valuation fight with enormous consequences for the debtor’s reorganization prospects. Mr. Togut, as the attorney for a court-appointed valuation expert, used his mediation skills to help bring the warring parties together and assisted in achieving consensus about the value of the corporation. As a result, the $10 billion gap was closed, and the debtor was able to have an uncontested confirmation hearing. The debtor emerged from Chapter 11 as a viable business.

In the Solutia reorganization, it was necessary to obtain the parties’ agreement to a litigation moratorium before mediation of $120 million in noteholder claims could get underway. Mr. Togut served as the neutral mediator. Through Mr. Togut’s efforts, the litigation settled, and the debtor achieved confirmation of its Chapter 11 plan.

A successful bankruptcy mediator must combine a thorough knowledge of the legal, financial, and practical aspects of the dispute at hand with the personal attributes of tact, diplomacy, and patience. Albert Togut knows how to get parties in sharp disagreement to understand the advantages of a settlement and to work productively toward a solution. The resulting savings in time and money can mean the difference between a successful reorganization on terms acceptable to creditors and the liquidation of the estate’s remaining assets at significant losses to all involved.

Examples of the mediation cases we’ve handled include:

Pacific Drilling S.A.

Counsel to the debtors through a complex mediation, which ultimately resulted in a consensual Chapter 11 plan that provided for the elimination of over $2 billion in debt and full payment of all senior secured and general unsecured creditors, and saw the debtors emerge with over $400 million in liquidity. Following confirmation, Togut, Segal & Segal LLP obtained an order disallowing an untimely $387 million secured claim that threatened to unwind the debtors’ consummated plan.

Toisa Limited

Counsel to the debtors, U.K.-based companies that owned a diversified and international shipping business with a fleet consisting of 26 offshore oil service vessels, 13 tankers, and seven bulkers. Togut, Segal & Segal LLP successfully advised the debtors in mediation sessions with 20 of their secured lenders involving over $1 billion in secured debt, which resulted in an agreed-upon pathway to confirm a Chapter 11 plan. Togut, Segal & Segal LLP successfully obtained U.S. Bankruptcy Court approval for, and assisted in the closing of, the sales of the debtors’ fleet of 20 oceangoing vessels, 26 offshore vessels, and construction contracts for six vessels, for total proceeds exceeding $550 million.

Dewey & LeBoeuf LLP

Counsel to the debtors in the largest law firm bankruptcy filing to date. Presented evidence in support of plan confirmation and directed full evidentiary hearing that resulted in the approval of a $71.5 million settlement with 440 former partners.