If we can presume that Scheer knew he couldn't resolve the default to Horizon it appears to me (maybe only me) that he filed for the reverse split with the plan to then file BK in hopes that Horizon might take stock for the balance of the defaulted loans, or that the Judge might rule favorably in Cereplast's favor to re-organize the debt with a new share structure.
Everything hinges on Horizon because of their encompassing agreements with Cereplast. If Horizon remains steadfast and demands the sale of Cereplast's assets the Judge must honor those demands. It is clearly stipulated in the U.S. Bankruptcy Laws that Secured Creditors have full rights and entitlements over any wants and pleas of an insolvent, Chaptered company. Secured Creditors will only agree to a Reorganization IF the chaptered company has a viable business that earns enough revenues to continue operating with easier debt payments.
Cereplast gains most of their money from toxic debt to convertible share sales, and not from earnings. Since Cereplast has engaged lawsuits against two toxic lenders Horizon could successfully argue that any suggestion to the Court by Cereplast for Horizon to take stock in lieu of their loans is their right to deny.
So, as I see it the planned reverse split is a Hail Mary faint hope in case Horizon stands down or the Judge rules in Cereplast's favor to reorganize versus Horizon's demands for a Chapter 7 Liquidation.
In poker vernacular Cereplast has a pair of deuces and Horizon has a Royal Flush.
Scheer either has a new Financier in place NOW or the Judge will be compelled to rule in Horizon's favor for the liquidation of Cereplast's assets, and upon liquidation the Judge is then compelled to cancel CERP equity.
To bite the worm of incite is to bite the HOOK of the antagonist . They win .
