From Law360:
Implant Sciences Gets Tentative OK On Ch. 11 Disclosures
Share us on: By Matt Chiappardi
Law360, Wilmington (June 14, 2017, 7:54 PM EDT) -- A Delaware bankruptcy judge agreed Wednesday to OK the disclosure statement for the former Implant Sciences’ Chapter 11 plan, but left the door open for additional rulings, including on competing add-ons to the document from the bomb detector maker and its shareholders that turned into a dispute that morning.
During a hearing in Wilmington, U.S. Bankruptcy Judge Brendan L. Shannon said he was prepared to approve the disclosure statement describing a liquidating plan that divvies up the proceeds from Implant Sciences’ $117 million sale to L-3 Communications Corp. and incorporates a $46 million settlement with prepetition lenders DMRJ Group LLC, Montsant Partners LLC and Platinum Partners Value Arbitrage Fund LP that satisfies their claims.
The plan for Implant Sciences, now referred to as Secure Point Technologies Inc. in court papers, aims to pay all allowed claims in full and has an unusual component that asks equity holders to choose between reinvesting their potential recoveries into another venture that could potentially generate higher returns, or have the money allotted to them distributed in cash, according to court records
But a number of issues remained between the debtor and the official committee of equity holders, chiefly over additional letters from both entities — one from the debtor advocating the investment option, and another from the equity committee backing recovery distribution — proposed to be included in the solicitation materials to shareholders, which is the only class of creditor eligible to vote on the plan.
The equity committee alleged that the debtor’s letter is inaccurate, and wanted to show the court how, a bid Judge Shannon shut down almost immediately as a “waste of time and money,” and said he was “largely unsympathetic” to both parties in the dispute.
“This brawl, I’m trying to short circuit,” the judge said from the bench. “You are all at risk of taking a silk purse and turning it into a sow’s ear.”
Judge Shannon said that the Bankruptcy Code does not allow for disclosure statement hearings to be evidentiary ones, and that the only matter he is tasked with deciding is whether the disclosure statement accurately describes the measures in the Chapter 11 plan.
Whether those measures are based on factually correct assumptions is for him to decide at confirmation.
“Life is too short for me to spend an enormous amount of time pondering through every line of these letters,” the judge said.
Judge Shannon directed the parties to come to some agreement on the letters or make submissions to the court by Monday on just how each other’s communiqués are deficient. He would then make any rulings needed and enter the order associated with the disclosure statement, the judge said.
Letters included in disclosure statements from dissenting parties are usually a common phenomenon, typically submitted by one of the statutory committees in a case explaining that they disagree with the recommendations from the debtor.
In this case, the Chapter 11 plan has a relatively unusual feature that offers a choice between two paths for shareholders, and the court previously rejected the filing of a competing plan from the equity committee.
Confirmation is tentatively scheduled for Aug. 3, but Judge Shannon said he might consider delaying the date slightly if circumstances warrant it.
Implant Sciences filed for Chapter 11 protection in October after its liquidity dried up to the point that it couldn't make payments on a series of note issues made between 2008 and 2014. It began searching for a buyer in August 2015, months before the notes began maturing, and operated under forbearance agreement until it filed for court protection.
Founded in 1984, the company started out providing products and services in the semiconductor and medical device fields in addition to its business making several explosive- and drug-detecting devices, the most popular of which is the QS-B220, a desktop explosives detector known as the Quantum Sniffer. The devices are used in most large airports throughout the world.
The debtor is represented by Matthew B. Lunn, Donald J. Bowman Jr. and Shane M. Reil of Young Conaway Stargatt & Taylor LLP and Paul V. Shalhoub, Debra C. McElligott and Jennifer J. Hardy of Willkie Farr & Gallagher LLP.
The equity committee is represented by Mark Minuti of Saul Ewing LLP and William R. Baldiga, Gerard T. Cicero and Sunni P. Beville of Brown Rudnick LLP.
The case is In re: FIAC Corp., et al., case number 1:16-bk-12238, in the U.S. Bankruptcy Court for the District of Delaware.
