Kelly Beaudin Stapleton is a managing director with
Alvarez & Marsal in New York. The national practice
leader for the Unsecured Creditors’ Committee
Practice, she specializes in creditor representations,
fiduciary roles, and fraud investigations across various
industries. Stapleton began her career as a prosecutor
and later worked for a large national law firm before
being appointed U.S. Trustee for Region 3 (Delaware,
Pennsylvania, and New Jersey), where she oversaw
restructurings that included New Century Financial,
Dura, Owens Corning, and Sharper Image. Stapleton
has advised numerous Chapter 11 proceedings in the
capacity of assisting clients in pre-bankruptcy and
post-bankruptcy financial and operational strategies.
bidding. Any of these scenarios are likely
to result in dissipation of value and little
available cash for unsecured creditors.
The committee must carefully
analyze the validity, perfection, and
enforceability of the claims and liens
of the senior lender. Even if the liens
of the senior lender are unassailable,
the committee should negotiate for
value for permitting the senior lender
to conduct a sale process under the
auspices of the Bankruptcy Court.
The committee should also assess the
sufficiency of the bid solicitation process
and scrutinize the bid procedures
to ensure a level playing field.
As the landscape for retail continues
to change and market factors affect
disposable income and tighten credit,
retail bankruptcy filings will continue
and perhaps even increase. But even in
the leanest of times, when lenders are
barely advancing enough of a DIP to get
through a fast tracked Section 363
sale or credit bid, there are benefits
afforded by the Bankruptcy Code to
make sure the unsecured creditor
constituencies are not left behind.
The interests of unsecured creditor
committees are aligned in their fiduciary
duty to the entire unsecured creditor
body in their mandate to maximize value
for the entire group. In the best of times,
the result is a reorganized debtor with a
healthy balance sheet, a realistic footprint
with a strong go-forward company,
and a 100 percent return to unsecured
creditors. In leaner times, these creditors
need the requisite tools to assess their
options and best use the leverage
afforded to them by the Bankruptcy
Code to monetize their return.
In a time when the run-of the-mill
Section 363 sale is really just a credit
bid by a lender trying to protect its
investment—with no other bidders—
that lender may have to take a
significant haircut to reap the benefits
of the Chapter 11 process. That creates
meaningful leverage for the creditors’
committee as well as for these otherwise
unsecured creditors in terms of 503(b)( 9)
and claims for stub rent. J
(based on data from Euromonitor, Forrester
Research, Kantar, and Moody’s).
3 US Online Retail Forecast, 2012 to 2017,
Forrester Research, March 2013, forrester.com.
6 11USC 1102(a)( 1) (2006).
7 11 USC 503(b)( 9) (2006).
8 In large retail bankruptcies, it is typical for a
debtor to seek establishment of a 503(b)( 9) bar
date, capping the estate’s exposure and lending
certainty to the claims pool. Committee advisors
should ensure their creditor constituency
timely complies or advise that they risk
the loss of their administrative priority.
9 11 USC 365(d)( 4)(B)( 1) (2006).
10 Stub rent is the unpaid rent due from the
date of the bankruptcy filing through the
end of that month under the lease.
11 11 USC 365 (2006).
12 11 USC 365(d)( 3) (2006).
13 See In re Goody’s Family Clothing Inc.,
401 B. R.656, 665 (D. Del 2009).