Bankruptcy Engagements
Operating
Chapter 11 Trustee
The Firm’s role as an
operating chapter 11 trustee in the Penick Pharmaceutical case was unique due to
several factors. First, Penick had been
in unsuccessful chapter 11 proceedings, without a plan on file, for three years
prior to our appointment. Secondly, the
company’s niche business as a manufacturer of controlled narcotic
pharmaceutical products was challenged by its insolvency and aged production
facilities. Finally, it was a textbook example of financial and administrative
irregularities, including a bankruptcy estate that was administratively
insolvent and in disarray. Prior efforts by the debtor-in-possession management
to refinance or sell Penick were, for a variety of reasons, unsuccessful. Similarly, management was unsuccessful in
revitalizing Penick during their tenure in chapter proceedings.
This presented The McManigle Company with a unique opportunity
to have an immediate, positive effect on the debtor's operations, its
employees, and to enhance the viability of the business. We re-established
credibility with Penick's sole customer, Bristol Meyers-Squibb and preserved
the value of the debtor’s unique licenses (to import opiates for further
manufacturing) issued by the Drug Enforcement Agency. During this case we had to immediately reverse numerous
administrative lapses, including correcting five years of un-reconciled
financial books and records and un-prepared Federal tax returns; implement or
correct inadequate or non-existent financial controls and reporting; replace
out-dated or insufficient insurance coverage; resolve withheld, but unpaid
employee 401(k) contributions; and, correct numerous other business,
regulatory, environmental and legal issues.
We were successful in re-invigorating the debtors’ plant
facility, improving the business relationship between Penick and its only
customer, BMS, and in improving the company’s product quality while negotiating
two manufacturing contracts that provided uninterrupted manufacturing
operations. Aside from reconciling the
debtor’s administrative issues, we successfully negotiated two new collective bargaining
agreements; produced and met cash collateral budgets; developed various
financial analyses and reports, and implemented financial controls. As an adjunct, we also enhanced adherence to
Federal, State and Local environmental and regulatory reporting requirements,
including successfully passing semi-annual Food and Drug Administration
inspection and Drug Enforcement Administration security inspections.
Our efforts culminated in the negotiation of a successful asset
purchase agreement as a component of a consensual plan of reorganization that
was confirmed by the Bankruptcy Court.
Liquidating Agent pursuant to confirmed Plan of Reorganization
In this case, the McManigle Company was elected Liquidating
Agent to liquidate the royalty interests in 260 producing oil and gas wells
located in Texas, Oklahoma, Montana and North Dakota (the
"Overrides") as established by the Lawrence Five State Liquidating
Trust (the "Trust"). Our
mandate was to obtain the best value for the Overrides while we investigated
and pursued deficiency claims against the debtor’s European general
partners. We also administered the
partnership and Trust’s affairs, terminated the partnership and made pro-rata
distributions to creditors.
To accomplish this, we employed a specialized marketing plan to
develop purchase interest in the Overrides and conducted an open auction that
had been approved by the Bankruptcy Court.
At this successful auction before twenty-two purchasers from the United
States and Canada, we sold the Overrides to the highest bidder for cash that represented
approximately 80% of the Override’s face value.
The Firm also successfully initiated and settled litigation in
Austria against a former general partner, negotiated a substantial settlement of
a similar claim against another general partner in Switzerland and made two
distributions to creditors.
Crisis Manager
We served as the crisis manager of these jointly administered
bankruptcy cases that were filed in Las Vegas, Nevada on February 28, 1997. Total HomeCare, Inc., a publicly traded
company, provided home health care services, durable medical equipment and
supplies to the Las Vegas, Nevada and Phoenix, Arizona metropolitan areas
through its three wholly owned subsidiaries.
In the months prior to filing
its bankruptcy, Total HomeCare had defaulted on its revolving line of credit
and was subjected to a change in its executive management that further
exacerbated the tenuous nature of the debtor/lender relationship. During this engagement, after gaining
consent for the continued use of cash collateral, priorities included,
stabilizing the debtor's operations, re-establishing credibility with the
lender by implementing accurate and timely financial reporting, and resolving
both client and vendor concerns. In this engagement, we reviewed and analyzed
the debtors' business operations, personnel and management policies. The Firm
recommended various operating and chapter 11 exit strategies to management with
many of these strategies implemented by the Firm to assure the viability of the
debtor as an ongoing business concern. One of the Firm’s Principals conducted
negotiations with both secured and unsecured creditors to provide for
uninterrupted acquisition of inventory and re-negotiated deposits with utility
companies. The Firm also played a significant role in the timely review,
preparation and completion of four separate sets of voluminous schedules and
statements filed with the Bankruptcy Court.
At the request of the secured lender, and based on its lack of
confidence in existing management, the Firm was named the debtors' sole Agent
to explore the sale of the enterprise. At times in this engagement, the
survival of the debtor hinged on our Principal’s ability to mediate disputes
between the debtor and its lender.
Subsequent to the replacement of operating management by the Board of
Directors, the exit strategy originally proposed by the Firm, was implemented
and the Nevada Bankruptcy Court approved a successful sale of the debtor’s
business operations.
Trustee of Creditor’s Trust pursuant to confirmed Plan of
Reorganization
In this engagement, we served at the behest of the committee of
unsecured creditors who elected us trustee of the Brockwood-Oliver Creditor's
Trust (the "Trust"). As trustee,
we were responsible for all aspects of the Trust's financial, legal and
reporting requirements.
The debtor, Brockwood Furniture was a Texas based retail
furniture dealer who confirmed a chapter 11 plan that provided for issuance of
a $1.0 million promissory note to the Trust, payable in quarterly
payments. As Trustee, we also
prosecuted numerous preferences under 11 U.S.C. §543 and several fraudulent
conveyance actions to recover monies for the Trust. We also were required to develop and implement cost-effective
litigation strategy and realistic settlement parameters.
Debtor's counsel had failed to fully perform a review and
compile a claims analysis of approximately $3.4 million of un-quantified claims
in the case. Post-reorganization,
Brockwood continued to falter and in late 1998, Brockwood defaulted on its
payment obligations to the Trust. We
foreclosed on the Trust's collateral, conducted a
"going-out-of-business" sale to liquidate inventory, and resolved
issues of the debtor's estate, including payment of administrative fees and tax
claims.
We were successful in quantifying all unsecured claims,
including reducing exorbitant administrative claims, that were unjustifiable
based on the substandard level of result arising from the chapter 11 and we
later made a distribution to the unsecured creditors.
Advisor/Administrator to Trustee in a large case Chapter 7
The McManigle Company was engaged
by the Chapter 7 Trustee to administer and winddown the business affairs of
this large, publicly traded, master limited partnership. El Paso Refinery, L.P. was a significant
petrochemical and fuel refinery with over $250 million in debt that had failed
during its Chapter 11 proceeding. In
this capacity, we provided the trustee with business advice, litigation support
and had responsibility for over $4 million in cash. We took control of and managed the estate's portfolio of diverse
assets, supervised the debtor's remaining employees and maintained the debtor's
voluminous books and records. During this two-year engagement, the Firm was
involved in virtually every aspect of this large, complex and multi-faceted
case. Our efforts to recover assets for
the estate; research and resolving numerous financial and regulatory issues;
head the effort to resolve the debtors numerous and complex tax issues; and,
development of litigation strategy with the trustee and his legal counsel
allowed the trustee to expeditiously address and complete many tasks in advance
of their initial completion dates.
We prepared preference analyses
and reports of the estate's financial condition while assisting in the
development of claims litigation strategy.
We were also tasked with the responsibility to supervise the termination
and distribution of the debtor's pension plans and successfully marketed and
sold assets. Finally we supervised and
directed the winddown of the estates administrative affairs during which we
prepared detailed operating and cash flow budgets while testifying before the
Bankruptcy Court in hearings over the use of cash collateral. This difficult and challenging case
ultimately yielded over a 100% distribution to unsecured creditors.
Representative/Advisor in Chapter 11
proceedings
As a representative and advisor,
we handled all aspects of due diligence, contract negotiations, and closings of
transactions, over a two-year period, during the disposition of a national home
furnishings specialty retailer and department store chain of a publicly traded
parent company in Chapter 11 proceedings.
We also managed and resolved significant issues for equity holders and
lease guarantors.
Directorships |Crisis
Management |Interim
Management Engagements | International
Receivership