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Saturday, October 16, 2021 6:37:02 AM
http://fordhamlawreview.org/wp-content/uploads/assets/pdfs/Vol_82/Dick_April.pdf
But Solyndra’s case differs from the typical Chapter 11 liquidation in a
very important respect. Although Solyndra also sold substantially all of its
assets during the pendency of its Chapter 11 case, it pursued a vaguely
styled “Joint Chapter 11 Plan” (the Solyndra Plan), claiming to effectuate
both a reorganization and a liquidation. In particular, the Solyndra Plan
contemplated that the parent would be reorganized and would continue to
exist, while the operating subsidiary would be dissolved.Following a
similar to how LBHI plan is called "the plan" and the plan is both a reorganization and a liquidation
Thus, in order to retain the future ability to use its valuable tax
attributes, a debtor company must emerge from bankruptcy intact. Of
course, Solyndra would not have been able to exit bankruptcy if it had been
liquidated under Chapter 7. Congress specifically prohibits the continued
existence of business entities following bankruptcy liquidation in an effort
to prevent “trafficking in corporate shells.” For the same reasons,
Solyndra’s stakeholders would not have retained the company’s tax
attributes if they pursued a pure plan of liquidation in Chapter 11
LEHMAN APPROVED A POR WITH A LIQUIDATION!!! THIS MEANS NOLS CAN BE PRESERVED!!!!!
Chapter 11 debtors and their stakeholders routinely engage in the indirect
transfer of valuable tax attributes through changes of ownership in the
reorganized company. For instance, some Chapter 11 plans contemplate
that the debtor’s historic creditors will succeed to the equity interests of the
reorganized company. In the recent Chapter 11 case of In re PMI Group,
Inc., The debtor’s equity security interests were cancelled and new common
stock was issued to creditors in exchange for their debt claims; this
arrangement allowed creditors to enjoy the benefit of approximately $1.2
billion of NOLs
JUICED
However, there are other instances where a Chapter 11 plan contemplates
that shareholders will receive equity interests of the reorganized debtor even
though creditors will receive minimal or no distributions. Indeed, as noted
above, Solyndra’s historic shareholders retained their equity interests under
the Solyndra Plan, effectively stepping ahead of creditors who received
only three cents on the dollar for their claims. Solyndra’s shareholders
relied upon a limited, judicially created210 exception to the absolute priority
rule where shareholders are permitted to invest new capital in the
reorganized debtor in exchange for the right to retain their equity security
interests, even though creditors are not paid in full
DO YOUR OWN DD! GLTA
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