In re Orfa Corp. of Philadelphia
| Decision Date | 02 July 1991 |
| Docket Number | 90-11255S,Adv. No. 90-0954S.,Bankruptcy No. 90-11253S,90-11254S |
| Citation | 129 BR 404 |
| Parties | In re ORFA CORPORATION OF PHILADELPHIA, Debtor. In re ORFA CORP. OF AMERICA, Debtor. In re ORFA CORPORATION OF AMERICA (DEL.), Debtor. BRUCE ENERGY CENTRE LIMITED, Plaintiff, v. ORFA CORP. OF AMERICA, Orfa Corporation of America (Delaware), Orfa Corporation of Philadelphia Robert S. Taylor, Trustee, Euro American Financial Corporation, Euro American Capital Corporation, and Corsair Asset Management, Inc., Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Louis H. Pollak, U.S. Dist. Court, Philadelphia, Pa., for the Eastern District of Pa.
Robert S. Taylor, Lewis, Eckert, Robb & Co., Plymouth Meeting, Pa., Trustee.
Warren Pratt, Drinker Biddle & Reath, Philadelphia, Pa., for Bruce Energy Center, Ltd.
Karen L. Turner, Philadelphia, Pa., for Security Pacific.
Matthew H. Krekstein, Schwartz & Krekstein, Philadelphia, Pa., for Creditors' Committee.
Michael L. Temin, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., for Licensees.
James J. O'Connell, Asst. U.S. Trustee, Philadelphia, Pa., U.S. Trustee.
Christopher Kuhn, Silberman, Markovitz, Meo & Raslavich, Philadelphia, Pa., for Trustee.
Allen B. Dubroff, Gary P. Lightman, Astor, Weiss & Newman, Philadelphia, Pa., for debtor.
Jeffrey Kurtzman, Klehr, Harrison, Harvey, Branzburg, Ellers & Weir, Philadelphia, Pa., for Bondholders.
Frederick D. Lipman, Earl M. Forte, Blank, Rome, Comisky & McCauley, Philadelphia, Pa., for Euro American Financial Corp.
Presently before us for disposition are the following related matters arising out of the case of three related Debtors holding certain valuable licenses of a process for recycling solid waste: (1) confirmation of the Second Amended Consolidated Plan of Reorganization ("the Plan") filed by Euro American Financial Corp. ("EAFC") and Corsair Asset Management, Inc. ("Corsair") (collectively "the Plan Proponents" or "the Proponents"); (2) an adversary proceeding instituted by Bruce Energy Centre, Inc. ("BEC") under 11 U.S.C. § 506 to determine the nature and extent of its claim ("the Adversary"); (3) a Motion of BEC for relief from the automatic stay ("the BEC Motion"); (4) a Renewed Motion of Security Pacific National Bank ("SPNB") for relief from the stay ("the Remand Motion"); and (5) a recently-filed Motion of SPNB to convert this case to Chapter 7 ("the Conversion Motion").
We hold that the Plan cannot be confirmed for the following reasons: (1) it fails to provide an adequate "market rate" of interest to SPNB, which we conclude must be no less than two (2%) percent above the prime rate; (2) it improperly combines what we conclude, in deciding the adversary proceeding, are secured claims of BEC in the same class as unsecured claims; and (3) it apparently fails to provide for sufficient payments to cure the delinquencies owed to Jetzer Technologie, B.V. and Organ-Faser Technology, the licensors of the Debtors' recycling process ("the Licensors"), to permit assumption of the executory Licensing Agreement of this process. In so concluding, we reject the following objections to confirmation: (1) the Plan improperly seeks to substantively consolidate the three Debtors' cases; (2) the Plan improperly places all claims of SPNB, including both secured and potential unsecured claims, in a single class; and (3) the Plan is infeasible.
Since preparation of a further Amended Plan, which cures the enumerated defects, seems within the Proponents' grasp, the motions of BEC and SPNB seeking relief from the automatic stay and that of SPNB seeking conversion are denied upon the condition that the Proponents (or any other interested party) promptly file a further Amended Plan curing the enumerated defects, with an accompanying Amended Disclosure Statement, and promptly pursue same to confirmation.
The filing of voluntary Chapter 11 bankruptcy petitions by instant Debtors, ORFA CORP. OF PHILADELPHIA ("ORFAPHIL"), ORFA CORP. OF AMERICA ("ORFAM"), and ORFA CORPORATION OF AMERICA (DEL.) ("ORFADEL"), began in a controversy regarding the composition of the Debtors' Boards of Directors and the legitimacy of the Boards' right to file these cases, which is described in an Opinion of this court of June 20, 1990, and an Order of July 20, 1990, reported at 115 B.R. 799 ("Orfa I"). On November 21, 1990, we filed an Opinion in which we denied SPNB's Motion for appointment of additional creditors' committees, which is reported at 121 B.R. 294 ("Orfa II"). In that Opinion, we noted that the Debtors' incumbent management failed in their efforts to keep the Debtors afloat. Id. at 295-97. We further described how the mantle of reorganization was then taken up by the Proponents, one of which (EAFC) was one of two groups of investors who lost the original skirmish with the incumbents. Id.
Although we refer the reader to Orfa I and Orfa II for detailed histories of the cases through November 21, 1990, we reiterate our description of the three Debtors and the principal players set forth in Orfa II as follows, 121 B.R. at 296:
(1) ORFAM — the parent company, whose Board ran all three Debtors and which paid management\'s salary; (2) ORFADEL — the holder of two potentially valuable licenses to operate the allegedly ingenious Orfa waste disposal system in the Western Hemisphere; and (3) ORFA PHIL . . . the owner of a now-non-functioning Orfa plant constructed in southwest Philadelphia. SPNB financed the construction of the plant and hence has a first mortgage on the real estate where it is located and its improvements. BEC , the second of the two groups of investors, with EAFC, was and apparently remains interested in acquiring licensing rights to construct an Orfa plant in Toronto, Canada.
The first of the matters before us to be filed was the Renewed 362 Motion, filed on November 5, 1990. The BEC Motion was filed on December 3, 1990. Both of these Motions were consolidated with a hearing to consider confirmation of the Plan on December 19, 20, and 21, 1990. Briefing on these matters was originally completed on January 25, 1991.
The Adversary was filed on December 17, 1990. Before it was listed for trial, the first of a series of conferences to attempt to aid the parties in attempting to negotiate a consensual plan was listed before the Honorable Judith H. Wizmur of the District of New Jersey on January 25, 1991. Ultimately, the record in the Adversary was made in testimony of February 20, 1991, and from a factual Stipulation of the parties filed on March 1, 1991.
This court, Judge Wizmur, and the parties had high hopes for settlement. On several occasions, SPNB and the Proponents, the primary protagonists, reported that they were very close to a resolution. However, for reasons of which this court is unaware due to our calculated distance from discussion of the substance of the negotiations before Judge Wizmur, no consensual plan materialized. A final deadline of June 5, 1991, passed without finalization.
In the mean time, on May 25, 1991, SPNB filed the Conversion Motion. The additional record on that Motion was the subject of brief testimony on June 5, 1991, and several stipulated facts. Incorporated into the record were the records of the hearing of August 30, 1990, on SPNB's original stay-relief motion; the hearing of September 12, 1990, on the Trustee's unsuccessful motion to sell ORFADEL's license rights to BEC; a hearing of September 28, 1990, on SPNB's original 362 Motion; the hearing of November 14, 1990, on the motion at issue in Orfa II, see 121 B.R. at 296; and a hearing of October 5, 1990, on a successful motion by the Trustee for a preliminary injunction in Adversary No. 90-0753S ("Adv. 90-753"), to prevent BEC from seizing Canadian sub-licenses of the Orfa process.
On June 5, 1991, this court, recognizing a significant lapse in time since the briefing was initially completed in January, gave SPNB and BEC until June 12, 1991, to file Briefs in support of the previously-unbriefed Conversion Motion and the Adversary, respectively. All interested parties were accorded until June 19, 1991, to file any responses or additional submissions of any sort.
The parties must be "briefed out." After receipt of the Briefs from SPNB and BEC referenced above, all that we received on June 19, 1991, was a one and a half page letter from the Proponents responding the BEC's submission relating to the Adversary.
At the close of the consolidated trial on December 21, 1990, SPNB and BEC stipulated that the automatic stay would remain in place, in accordance with 11 U.S.C. § 362(e) and Bankruptcy Rule 4001(a)(2), for 30 days after the submissions of the parties were originally due on January 25, 1991. Being concerned about the potential effect of § 362(e) as settlement negotiations before Judge Wizmur proceeded into March, we entered an Order of February 21, 1991, continuing the stay in effect "pending a final decision in all matters before us in the . . . hearings" concluded on December 21, 1990. This Order, plus the Order in Orfa II, and perhaps other matters, are on appeal to the district court, although these matters were apparently also "on hold" until June 5, 1991, pending the prospect of a global settlement.
It would exhaust reams of paper, serve little benefit, and be contrary to the parties' need for a prompt decision of the matters before us to begin this Opinion with a classic review of all testimony and evidence at the prior hearings and express findings as to each disputed point. Except for the single Adversary, which consists largely of a paper record, the matters before us are motions, which we do not believe necessitate strict compliance with the dictates of the first sentence of Federal Rule of Civil Procedure 52(a). See In re Campfire Shop, Inc., 71 B.R. 521, 524-25 (Bankr.E.D.P...
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