Alerts

Contested Plan Valuation Dispute: Chemtura Decision Highlights Valuation Issues

November 16, 2010

The current cycle of Chapter 11 corporate bankruptcies involves many cases where the debtor seeks to achieve a balance-sheet restructuring by converting debt into equity. When consensus cannot be achieved, junior stakeholders (i.e., second lien creditors, unsecured creditors and/or equity) will often contest plan confirmation on the grounds that the proposed plan provides more than 100% recovery to the senior creditors. Valuation plays the central role in these cases. A Southern District of New York bankruptcy judge confirmed the reorganization plan in In re Chemtura over the objection of the Equity Committee and other interested parties. The court’s decision is noteworthy because of its extensive valuation analysis.