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George Mason University School of Law

Bankruptcy Reorganization Seminar

Course 454-001Mondays 8:00 PM – 9:50 PM

Arlington Campus Hazel Hall, Room 432C

Craig B. Young, Adjunct Professorcraig.young@kutakrock.com

Spring 2012

Syllabus

Text:

There is no text other than a copy of the U.S. Bankruptcy Code, 11 U.S.C. §§ 101 – 1532(2011) (referred to here as “Code”) and the Federal Rules of Bankruptcy Procedure(referred to here as “Rules”). The Code must be current; the Rules must include the mostrecent Amendments including those effective 12/1/11. Both the Code and the Rules areavailable online.

Case Study:

The Seminar will use the chapter 11 case, In re Smitty’s Building Supply, Inc., Case No.09-10040-SSM, U.S. Bankruptcy Court, Eastern District of Virginia (AlexandriaDivision) as a case study. Papers and pleadings filed in the Smitty’s case will beavailable to students either online or by in-class handouts. Arrangements have beenmade to grant students in this Seminar direct online access to the Case Docket throughthe court’s PACER system. Students will need to have individual internet access. Papersand pleadings in the Smitty’s case are referred to here by the Docket Numbers, “Smitty’sDocket No. __”.

Prerequisites: Bankruptcy Law 167-001 or -002 or permission from the Professor.

Course Description: This Seminar will cover the procedures, the strategies and thedynamics of corporate reorganization under Chapter 11 of the U.S. Bankruptcy Code.There is no exam; there is a writing requirement. Students will be required to pick a topicduring the first half of the semester for their writing requirement. Suggested topics willbe provided.

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January 9, 2012 – FIRST CLASS: INTRODUCTION and ORGANIZATION

For this case study, we will divide the class into at least the following four groups:

- The Debtor – Smitty’s Building Supply, Inc. and three subsidiaries (3-4students)

- The Bank – Bank of America as both pre-petition and post petition lender (3students)

- Landlords – Retail spaces leased in metropolitan area (2 students)- Official Committee of Unsecured Creditors (3-4 students)

Students will be assigned as the “attorneys” for the above groups. The number inparentheses above indicates how many students will be assigned to each group.

January 16, 2012 – MLK. No Class.February 13, 2012 – No Class.March 12, 2012 – Spring Break. No Class.

We will discuss the following topics in the following order, sometimes in one meeting,sometimes over more than one meeting.

THE DEBTOR

Who is the “Debtor” in this case? Why did Smitty’s file bankruptcy? What did Smitty’shope to accomplish through a reorganization? What did it take to get ready for filing thebankruptcy? Who was involved? Smitty’s Docket Nos. 1, 3, 4, 6, 7, 9, 13, 15, 19, 20, 21,24, 71, 84, 85, 86, 92, 94; Review: Code §109 (eligibility), §327 (employment ofprofessionals), §521 (what Debtor must file), §541 (property of the Estate), §362(automatic stay), §1101(1) & §1107 & §1108 (debtor in possession); Rules 1007 (lists,schedules and statement); See also 28 U.S.C. §§ 1408-1410.

THE COMMITTEE

How does a Committee get formed? How does the Committee hire professionals? Whatpower and authority does a Committee have? What role did the Committee play inSmitty’s? What is §1102(b)(3) all about? Smitty’s Docket Nos. 70, 73, 82, 83, 104, 122,123, 155, 346; Review: Code § 1102 (Creditors Committees), §1103 (Committee Powersand Duties), §503 (Expenses), §341 (Meeting of Creditors); Rules 2003 (Meeting ofCreditors), 2007 (Review of Committee Appointment).

LEASES AND CONTRACTS

In 2005 and 2006, Smitty’s had grown to one of the largest building supply company’s inthe Washington Metropolitan area. During this time it expanded its operations andopened more retail facilities. Then the economy began to go down and sales fell. DidSmitty’s expand too fast? Did it need to continue to operate the several facilities? How

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does the debtor decide which facilities to close? How does a debtor close facilities itdoesn’t want/need? What are the costs of closing facilities? How does the debtornegotiate the closings – or does it need to negotiate? Smitty’s Docket Nos. 16, 18, 22,125, 127, 229, 260; Review: Code § 363 (use of assets); § 365 (executor contracts andunexpired leases); §361 (cash collateral).

FINANCING and FINANCES

Prior to bankruptcy, Smitty’s tried to restructure and/or refinance its existing debt.Smitty’s had cash flow problems that included an inability to make payments on itsoutstanding obligations to pre-bankruptcy lenders. What happened prior to thebankruptcy? Did the situation with Smitty’s lenders create the need for the bankruptcyfiling? What was the impact of Smitty’s financial problems on the Smith Family? Howdoes the debtor in chapter 11 pay for operations? Why would anyone loan money to abankrupt company? Who actually financed Smitty’s and why? Smitty’s Docket Nos. 26,27, 53, 135, 139, 140, 141, 142, 143, 144, 145, 146, 180, 181, 185, 198, 199, 247, 292,331, 348; Review: Code 364 (Financing).

BANK OF AMERICA

What role does a lender play in the management decisions of a borrower? How far canthe lender go? When should a lender “pull the plug”? Are there times when a lendercannot afford to pull the plug? What are the lender’s options? Who has what leverage inthese decisions prior to a bankruptcy filing; after the bankruptcy filing? Review: Code §364, § 1102(b)(1), § 1122, § 1124.

WHAT GOES ON DURING THE BANKRUPTCY

How does Smitty’s operate during bankruptcy? What can it do and what can it not do?What does the debtor do about operational issues? What does the Debtor need to do inpreparation for filing its Plan? Smitty’s Docket Nos. 156, 157, 158, 162, 167, 187, 203,206, 207, 216, 217, 233, 254; Review: Code § 365, § 502, § 503.

NEGOTIATING A DEAL

The dynamics of the parties: The Debtor, the Committee and the Bank. Who has theleverage? What does each party want out of the bankruptcy and how do they get whatthey want?

DISCLOSURE STATEMENT

What do you disclose? Can the debtor hide anything? How do you write it and who doyou expect will (can) read it? How does the Debtor get the Disclosure Statementapproved? Once the Disclosure Statement is approved, what happens next? Who gets it?What else does the Debtor have to send with the Disclosure Statement? What role does

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the Committee play? Smitty’s Docket Nos. 223, 225, 227, 228, 253, 255, 270, 272, 273,276, 285; Review: Code 1125; Rules 3016, 3017.

THE PLAN

What’s in the Plan? What’s not in the Plan? What does this all mean? When does it goeffective? When does it all end? Smitty’s Docket Nos. 243, 244, 252, 269, 271, 277,279, 291, 311, 319, 321, 322, 323, 324, 325, 326, 327, 338, 339, 340, 342, 345; Review:Code §1121, § 1123, §1126, §1127.

VOTING ON THE PLAN

Who gets to vote? How do they vote? How do you coordinate the voting? What’s avote worth? How do you get the votes needed to confirm the Plan? Review: Code§1128, §1129, §1141.

POST CONFIRMATION

The “Third Part of Reorganization”. What goes on after the Plan is confirmed? Whorepresents whom? Who pays for it all? When do the creditors get paid? What has to bedone before creditors get paid? Smitty’s Docket Nos. 343, 344, 350, 351, 353, 355, 357,371, 373, 374, 376, 378, 380, 382, 384, 386, 388, 390, 392, 394, 396, 397, 398, 399, 400,408, 409.

April 23, 2012 – LAST CLASS.