Post-Confirmation Trust Counsel: Help Through Liquidation

If the debtor in a complex Chapter 11 case cannot win creditor support for a plan of reorganization that will allow it to continue operations as a going concern, an alternative is the confirmation of a Chapter 11 liquidating plan, which typically calls for the debtor to sell off or collect its remaining assets and transfer the proceeds into a trust. A trustee is selected by the creditors to administer and distribute the assets according to the priorities set forth in the plan.

Togut Firm has extensive experience with the functions of post-confirmation trust counsel following the approval of Chapter 11 liquidating plans. Our attorneys can fulfill the legal and practical responsibilities related to the two main tasks associated with Chapter 11 liquidation: asset sales and asset recovery, including preference litigation.

The most positive return on the debtor’s assets is often available through the recovery of preferential payments, fraudulent conveyances, and other unliquidated claims in the hands of the debtor-in-possession (DIP). Beyond merely protecting the value of the debtor’s remaining assets, our lawyers create value through creative and cost-effective approaches to post-confirmation litigation.

Liquidating plans are often regarded as offering creditors a higher return on the assets at a lower administrative cost than a conversion to a Chapter 7 case, and Togut Firm can advise the post-confirmation trustee about the best ways to achieve that result. Contact us at our New York City offices to learn more about our approach to creating and protecting asset value under a Chapter 11 liquidating plan.

To cite but one example, Togut Firm was sought out by Alan Miller, who became the head of the liquidating trust of Collins & Aikman to investigate and prosecute the preference and fraudulent conveyances of that estate. No investigation had been conducted prior to Miller’s appointment and it fell on the Togut Firm to do that work, analyze the transactions, identify which of them could be recovered, and then recover them. More than $60 million in cash was recovered (plus claims waivers and reductions), which was much more than Miller expected. For one of the preference actions, the Togut Firm conducted a trial that lasted a full week and resulted in a $20 million cash recovery.

More recently, the Togut Firm represents the plan administrator for the liquidating debtors of Synergy Pharmaceuticals, biopharmaceutical companies that were focused on the development and commercialization of novel gastrointestinal therapies. They sold substantially all their assets in a Section 363 sale and thereafter confirmed a liquidating Chapter 11 plan. We assisted the plan administrator with multiple omnibus claims objections and the reconciliation of claims asserted for a total of approximately $30 million; the coordination of plan administrator distributions; the rejections of contracts; and discovery regarding potential affirmative litigation claims.