The days preceding and following a company’s bankruptcy filing are some of the most hectic in a bankruptcy lawyer’s professional experience, with one good night’s sleep typically representing the total number of hours slept during the entire week. Most debtor lawyers use first-day motions as the opportunity to educate the judge, who is seeing the case for the first time, of the circumstances leading to the bankruptcy filing, the business challenges ahead, and the debtor’s reorganization prospects. Generally, the first-day hearing is a well-orchestrated event in which the debtor pretty much gets what it asks for, the judge begins to learn about the case, and final evidentiary hearings are scheduled on matters requiring notice and a hearing.
The NY office of Kirkland & Ellis, led by veteran lawyer Richard Cieri, handled Calpine’s massive filing this week, and got several routine first-day motions granted which were aimed at providing a relatively seamless transition for the company into bankruptcy from a purely operational perspective. In addition, several key substantive motions were presented, including the following (all of which are available for your downloading convenience):

Links to news reports on the filing are available here, here($), here($), and here. Here’s a link to Tom Kirkendall’s initial report on the filing.
On a related point, Calpine investors and speculators looking at the “end game” here and trying to predict ultimate values available for distribution will surely find of interest a recent opinion from Judge Dennis Michael Lynn, the bankruptcy judge overseeing the Mirant Group bankruptcy case. In re Mirant Corp., 2005 WL 3471546, (Bankr. N.D. Tex., 12/9/05). In this lengthly opinion, Judge Lynn tackles the question of how to determine the “total enterprise value” of the entities that make up Mirant Corp. and its 82 affiliated entities for purposes of plan confirmation. In the end, he concluded, valuation of a behemoth like Mirant is far more art than science. He wrote:

At best, the valuation of an enterprise like Mirant Group is an exercise in educated guesswork. At worst it is not much more than crystal ball gazing. There are too many variables, too many moving pieces in the calculation of value of Mirant Group for the court to have great confidence that the result of the process will prove accurate in the future. Moreover, the court is constrained by the need to defer to experts and, in proper circumstances, to Debtors’ management. The law governing the court, from Till [v. SCS Credit Corp., 541 U.S. 465 (2004),] to Protective Comm. [v. Anderson, 390 U.S. 414, 442 (1968)] was developed in cases far different from that at bar.
It may be that there are better ways to determine value than through courtroom dialectic. That said, the court must work within the system created by Congress-and, in valuing a company in chapter 11, that system contemplates an adversary contest among parties before a neutral judge. The court believes all participants in the Valuation Hearing performed their duties to their constituencies, Debtors’ estates, the public and the court, for which it expresses its appreciation.

The Court first described the process of sifting through the evidence and preparing for the contested hearing on valuation as follows:

Continue Reading Calpine’s Bankruptcy: Key First Day Pleadings, Plus a Glimpse from Mirant Group’s Bankruptcy Court into Valuation Issues of Relevance to Calpine Investors and Speculators

Houston’s Bankruptcy Judge Marvin Isgur, the leading author of opinions of first impression interpreting BAPCPA’s provisions as they relate to consumer debtors (see here, here (Charles case), here, and here), tackles another thorny issue of first impression in In re Toro-Arcila, 2005 WL 3370045 (Bankr. S.D. Tex., 12/12/2005). By way of background, BAPCPA’s provisions distinguish between “multiple serial filers” (2 or more cases were dismissed in year before the present case filed) and “single serial filers” (only 1 case dismissed in year before the present case filed). Single serial filers get the benefit of the automatic stay for the first 30 days of the case, but the filing is presumed in bad faith and can be rebutted only by clear and convincing evidence that the filing was not in bad faith. Judge Isgur recently developed two handy charts to guide judges and lawyers through the thicket of rules addressing the issues that must be examined in determining whether the stay should be extended as to a single serial filer (see here).
In this case, Judge Isgur addresses a separate issue: if the single serial filer fails to get the stay extended under Code section 362(c)(3), can the debtor move under Code section 362(c)(4)(B) for reimposition of the stay despite the fact that this Code section appears “at first blush” to be for the benefit only of multiple serial filers?
In concluding that what appears to be true “at first blush” is actually incorrect, Judge Isgur rejects the statute’s apparent “plain meaning.” To do otherwise, he concludes, would effectively render exactly 278 words in BAPCPA superfluous, a result Congress could not have intended. Judge Isgur then somehow remarkably divines that, “coincidentally,” the Gettysburg Address (which he quotes in its entirety, and is always worth rereading) of President Abraham Lincoln was also 278 words. From this coincidental fact, Judge Isgur concludes, tongue-in-cheek:

Although the meaning of this subsection [of BAPCPA] cannot be compared to the importance of the Gettysburg Address, the Court presumes that Congress did not codify words of comparable length with no meaning whatsoever.

As to the statutory provisions of BAPCPA in question, in concluding that “the ‘first blush’ intepretation is incorrect,” Judge Isgur draws not only upon the Gettysburg Address, but upon well developed countervailing principles of statutory construction to avoid rendering whole sections of the statute superfluous. Given that, per Bankruptcy Judge Robert Mark, BAPCPA “is not a model of clarity,” and per Judge Isgur, BAPCPA can be “particularly difficult to parse and, at worst, virtually incoherent” (see here), Judge Isgur’s dance around the “plain” or “first blush” meaning provides the bankruptcy judge and practitioner with some important tools for preventing BAPCPA from becoming the statutory nightmare it has the potential to be. He writes:

Continue Reading Judge Isgur Cites to the Gettysburg Address as Basis for Rejecting “First Blush” Interpretation of BAPCPA’s Multiple Serial Filer Stay Provisions