Category Archives: DE Chapter 11 Debtors
I am analytical. I like numbers. I like clear answers. Black and white. Not grey.
I was the Calculus member of my high school’s academic team in high school. Dad was an industrial engineer and the visual lens through which he viewed the world rubbed off on me. I initially majored in Physics because I appreciated how Calculus concepts could be applied to real life.
Fast forward 25 years. I love my work as a business lawyer. But, I still crave that opportunity to solve math problems (I did have a chance to be a financial analyst for two years before I started the firm). I just recently realize that, whenever I can, I attempt to solve my clients’ legal problems using spreadsheets and finite alternative scenarios. I reduce chaos and moving parts down to a formula, decision tree, or spreadsheet. There are only so many scenarios. There is a range of only so many possible outcomes. The law can only go so many ways.
Such an approach has worked really well for me in the context of settling business litigation. Recently, in bankruptcy litigation, I had to resolve the extent, amount, and priority of competing lien positions of 5 creditors (2 mortgage holders and 3 taxing bodies), on my clients’ commercial assets (including a building) and one of the owner’s residence. We tried to negotiate for months and no one was budging, but then I busted out my spreadsheets. I kept running the numbers given different assumptions regarding the value of the assets, whether to include interest and penalties, and given the two alternative legal outcomes as to whom should be first in lien priority. With the help of an esteemed mediator, we resolved the matter and successfully confirmed the plan of reorganization.
My abstract skills and fancy excel handywork also came in handy when I was about 29 (12 years ago, gasp), and working as a young associate. I developed an extensive series of “aging analysis” excel spreadsheets to utilize math to resolve a special type of bankruptcy litigation: preference litigation. The cases we handled were large dollar amounts in controversy, ranging from $15k- $8 million. Where a creditor is sued in a preference action (see first post on What the Heck is a Preference Action: Paying Off Favorite Creditors As a Business Tanks), there is an ordinary course of business defense. In order to mount this defense, a defendant should present an “aging analysis” of the length of time the parties were engaged in the transactions at issue.
We settled every time (with only one exception) and I am sure my extensive volumes of “aging analysis” spreadsheets helped. Maybe Dad would have preferred that I became an engineer like him. I don’t know. I do know that he would be proud of the way I approach my work now. Both my clients and I can thank my science and math teachers (Mr. Pete Karpyk, Mr. Phil Carey, Mrs. Kladakis, Mr. J.) for helping me be able to create these frameworks in which I can more readily resolve legal problems. So remember, #notalllawyershatemath.
Stay tuned for another post on exactly what is an “aging analysis” to be used to mount an ordinary course defense in a preference action.
Salene is a business and bankruptcy lawyer. This post does not constitute legal advice and does not constitute a guarantee of any legal outcome. The facts and legal issues vary from case to case; and not all outcomes will be the same.
By: Stephen Krug, Law Clerk
The various entities that comprise the Quiznos sandwich chain (“debtors”) filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware on March 14, 2014. A motion filed by debtors for joint administration of the cases was granted on March 17, and the case has been assigned to the Honorable Peter J. Walsh.
While debtors’ liabilities range from $500 million to $1 billion, the assets are only estimated to fall between $0 and $50,000. However, Debtors maintain that, although assets are low and 10,001 to 25,000 creditors exist, funds will be available for distribution to unsecured creditors. U.S. Bank National Association, as administrative agent and collateral agent under debtors’ second lien financing facility, is the largest unsecured claimant with a claim for approximately $174 million. Horizon Media Inc., MG-1005, LLC, and ESPN Inc. also hold substantial unsecured claims.
Debtors have proposed a pre-packaged reorganization plan that would slash debt by more than $400 million and would permit the handful of company-owned sandwich shops to remain operational. Sandwich stores operated by franchisees are not part of the bankruptcy proceedings and thus are not provided for in the pre-packaged plan.
Debtors hope to emerge from bankruptcy more viable than ever. Moving forward, debtors hope to reduce food costs and place more of an emphasis on advertising.