In re Lupatech S.A.

• Decision Date: 10 January 2020
• Docket Number: Case No. 16-11078 (MG)
• Citation: 611 B.R. 496
• Parties: IN RE: LUPATECH S.A., et al., Debtors in a Foreign Proceeding.
• Court: U.S. Bankruptcy Court — Southern District of New York

611 B.R. 496

IN RE: LUPATECH S.A., et al., Debtors in a Foreign Proceeding.

Case No. 16-11078 (MG)

United States Bankruptcy Court, S.D. New York.

Signed January 10, 2020

ROBINSON BROG LEINWAND GREENE GENOVESE & GLUCK P.C., Attorneys for the Foreign Representative, 875 Third Avenue, 9th Floor, New York, New York 10022, By: Steven B. Eichel, Esq.

MEMORANDUM OPINION GRANTING FINAL RELIEF AND ORDERING THAT THE CASES BE CLOSED ON THE TERMS PROVIDED IN THE ACCOMPANYING ORDER

MARTIN GLENN, UNITED STATES BANKRUPTCY JUDGE

As the history of these chapter 15 cases shows, sometimes the interplay between a foreign proceeding that is subject to appellate challenge in the foreign country, and the relief needed to effect the consummation of a plan approved by the foreign court and to close the chapter 15 cases, can seemingly lead to a ping-pong match requiring new rulings from both courts on largely non-controversial issues, before an approved reorganization plan can be successfully consummated. Pending before the Court in these jointly administered chapter 15 cases is a Motion (the "Motion," ECF Doc. # 46) for entry of an order recognizing and enforcing the December 2018, September 2019, and November 2019 Orders (as defined below) within the territorial jurisdiction of the United States; authorizing and directing certain U.S. Intermediaries to carry out any ministerial actions that are required of them under the New Lupatech Plan and granting them protection for the performance of such actions; finding these cases to be fully administered and closing these cases without prejudice; and granting such other relief as the Court deems just and proper.

The Motion was filed by Rafael Gorenstein, in his capacity as the authorized Foreign Representative (the "Foreign Representative") of Lupatech S.A. and its affiliated debtors (collectively, "Lupatech," or the "Debtors"). The Motion is supported by a declaration by Rafael Gorenstein. ("Gorenstein Declaration," ECF Doc. # 47.) The Motion is unopposed.

For the following reasons, the Motion is GRANTED and the cases are ordered to be closed on the terms provided in the separate accompanying order granting relief.

I. BACKGROUND

Lupatech S.A. is the direct or indirect parent company of each of the other Debtors.

The Debtors form the "Lupatech Group," a provider of technical components and specialized services to the oil and gas industries. (Motion ¶ 5.)

A. Relevant Case Background

1. The Original Lupatech Plan in the Foreign Court

On August 24, 2015, the Debtors filed a judicial reorganization plan (the "Original Lupatech Plan") with the First Chamber of Bankruptcy, Judicial Recovery and Arbitration Disputes of the Comerca Forum of São Paolo (the "Foreign Court") to restructure their claims, including certain notes (the "Notes"), and provided four payment plans for unsecured creditors. (Id. ¶ 6.) The Original Lupatech Plan was approved by the requisite number of creditors, and on December 16, 2015, the Foreign Court entered its Order homologating (or approving) the plan (the "Original Homologation Order"). (Id. ¶¶ 7–8.) Two creditors subsequently filed appeals (the "Appeals"), alleging that the payment options contained in the Original Lupatech Plan violated Brazilian law. (Id. ¶ 9.)

2. The Chapter 15 Cases

On April 27, 2016 (the "Petition Date"), the Foreign Representative filed these chapter 15 cases by filing verified chapter 15 petitions in this Court. (Id. ¶ 10.) On the same day, the Foreign Representative filed a motion seeking entry of an order granting the chapter 15 petitions and recognizing the foreign proceeding in Brazil as a foreign main proceeding, recognizing and enforcing the Original Lupatech Plan and the Original Homologation Order, and granting additional relief (including authorizing certain U.S. Intermediaries to carry out ministerial actions required or necessary under the Original Lupatech Plan). (Id. ¶ 11.) On May 26, 2016, the Court granted the Foreign Representative's petition and motion, and entered its Order Granting Recognition of Foreign Main Proceeding and Certain Related Relief, including recognizing the Original Lupatech Plan. ("Recognition Order," ECF Doc. # 15, ¶ 12.)

3. The New Lupatech Plan

In June 2016, the 2nd Reserved Chamber of Business Law of the Court of Appeals of São Paulo granted the Appeals, annulled the Original Lupatech Plan, and ordered that several criteria should be complied with in a new judicial reorganization plan (the "Reversal"). (Id. ¶ 13.) On July 20, 2016, after the Foreign Representative informed the Court of the Reversal, the Court entered an Order Modifying the Recognition Order, suspending its previous recognition of the Original Lupatech Plan and Original Homologation Order. (ECF Doc. # 22; Motion ¶ 14.)

On September 5, 2016, the Debtors filed a modified restructuring plan (the "New Lupatech Plan," or the "Plan") with the Foreign Court, which, inter alia , provides only one payment option for unsecured creditors, consistent with Brazilian law and the Reversal. (Motion ¶ 15.)

With respect to Noteholders' Unsecured Claims (as defined in the New Lupatech Plan), consummation of the Plan requires (i) 50% of the amount of such claims to be paid in cash and (ii) 50% of the amount of such claims to be paid with Subscription Warrants (as defined in the New Lupatech Plan). (Id. ¶ 16.) The cash payment is to be effectuated by delivery of notes to such claimants. The Plan provides that after the Foreign Representative obtains approval of the New Lupatech Plan and approval from this Court "acknowledging the efficacy of the [New Lupatech] Plan," the current notes will be "cancelled by operation of law and replaced by New Notes to be issued by Lupatech subsidiary Lupatech Finance Limited" (the "Exchange"). (Id. ) (internal quotation marks and citations omitted). Paragraph 6.4.5 of the New Lupatech Plan also provides that Subscription Warrants due to the Noteholders shall be delivered by means of American Depositary Warrants representing such Subscription Warrants, or in another manner economically equivalent to the Noteholders. (Id. ¶ 17.) Paragraph 8.3.5 of the New Lupatech Plan indicates that if Noteholders want to participate in a future debt-to-equity exchange, they would receive American Depository Receipts, whereby Paragraph 9.2 allows the Debtors to take economically equivalent measures when not possible to fulfill the original obligation. (Id. )

On November 8, 2016 the New Lupatech Plan was approved by (i) 98.63% of the labor-related creditors by number and 84.93% by amount of their claims, (ii) 84.13% of the unsecured creditors by number and 75.19% by amount of their claims, and (iii) 98.57% of the Microenterprise and Small Enterprise creditors by number and 75.51% by amount of their claims. (Id. ¶ 19.) No appeals were filed, and the appeals period has passed. (Id. ) Thus, on December 1, 2016, the Foreign Court entered its order homologating the New Lupatech Plan (the "New Homologation Order"). (Id. ¶ 20.)

On January 12, 2018, the Foreign Representative filed a motion with the Court for an order (a) recognizing and enforcing the New Lupatech Plan and the December 2016 Homoglation Order; (b) authorizing and directing certain U.S. Intermediaries to carry out any ministerial actions that are required under the New Lupatech Plan and granting them protection for the performance of such actions; and (c) finding the chapter 15 cases to be fully administered and closing them without prejudice. (Id. ¶ 21.) On March 26, 2018, the Court approved the Foreign Representative's motion and entered an Order Granting Final Relief in Aid of Foreign Proceeding and Closing the Cases. ("Supplemental Recognition Order," ECF Doc. # 38.)

Following the Court's Supplemental Recognition Order, Debtors and their attorneys and advisors: (1) drafted an indenture relating to the issuance of New Notes (the "New Indenture"); (2) drafted a warrant agreement relating to the issuance of Subscription Warrants (the "Warrant Agreement"); (3) engaged Wilmington Savings Fund Society ("WSFS") to serve as indenture trustee for the New Notes under the New Indenture and as warrant agent for the Subscription Warrants under the Warrant Agreement; (4) engaged with BNY Mellon, the Current Indenture Trustee, to determine its requirements for allowing for the cancellation of the current Notes in the Exchange; (5) engaged with Depository Trust Company ("DTC") to determine its requirements for the cancellation of the current Notes and issuance of New Notes and Subscription Warrants in the Exchange; and (6) drafted a notice to holders of Notes relating to the Exchange and the issuance of New Notes under the New Indenture and Subscription Warrants under the Warrant Agreement. (Id. ¶ 23.)

4. The Foreign Representative's Motion to Reopen

On August 20, 2018, the Foreign Representative filed a motion to reopen the bankruptcy cases pursuant to section 350 of the Bankruptcy Code for the purpose of (1) declaring that the issuance of New Notes and Subscription Warrants, in exchange for the cancellation of the current Notes in the Exchange, or any other transactions to be effected as part of the Exchange, are exempt from the registration requirements of Section 5 of the Securities Act of 1933; (2) declaring that the Trust Indenture Act of 1934 does not apply to the cancellation of the current Notes in exchange for the issuance of the New Notes and Subscription Warrants; and (3) granting such other relief as the Court deems just and proper. (Id. ¶ 24.)

On October 3, 2018, the Court granted the Foreign Representative's motion to reopen the case. (ECF Doc. # 44.) In addition to reopening the case and exempting the issuance of New Notes and Subscription Warrants in exchange for the cancellation of the current Notes pursuant to the New Lupatech Plan from registration under the Securities Act, the Order also authorized and directed DTC and BNY Mellon (as Current Indenture Trustee) to take lawful actions that may...