MorrisAnderson Chapter 11 Liquidation Turned into Successful Plan of Reorganization

Challenge

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$400 million milk producer in NY/NJ – subsidiary of Parmalat S.P.A. $100 million loan to Parmalat USA, with funds upstreamed to parent. Company filed for bankruptcy following parent’s bankruptcy filing.

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• Milk producer went into bankruptcy along with its European parent.
• Bank risked losing a significant portion of $100 million senior stake due to strong opposition from other lenders who preferred liquidation to an equity stake.
• MorrisAnderson’s analysis uncovered various errors in company’s forward looking assumptions that would significantly impact and undermine Bank’s position.
• Potential fraudulent conveyance allegations by UCC could impact Bank’s payout significantly to below that of unsecured creditors.

Solution

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• Company sold or closed all non-core assets.
• New management team renegotiated contracts with major supermarkets.
• Settlement negotiations with UCC resulted in fraudulent conveyance allegations dropped, preserving senior position for Bank and with higher payout to unsecured creditors.
• Other senior lenders bought into the reorganization plan instead of liquidation.

Results

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• Company emerged from bankruptcy and is performing better than plan.
• Bank likely was repaid their investment.