Arch and Creditors Reach Settlement
July 7, 2010

Since Arch Aluminum & Glass Co. Inc. emerged from Chapter 11 Bankruptcy in February (CLICK HERE for related article), creditors have continued to seek some monetary return from the company. On June 29 the U.S. Bankruptcy Court, Southern District of Florida, Fort Lauderdale Division, held a hearing at which the Official Committee of Unsecured Creditors, on behalf of all general unsecured creditors; certain administrative claimants, including the William L. Bonnell Co. Inc., Zeledyne LLC, Guardian Industries Corp. and Pilkington North America Inc.; PNC Bank N.A.; and Arch have reached a settlement.

Court documents explain that on January 12, 2010, Arch conducted an auction in accordance with the sale and bid procedures order. The documents note that at the conclusion of the auction, the court accepted Arch's opinion that the bid submitted by "Arch Aluminum & Glass Enterprises Inc." was the "highest and best bid for substantially all of the debtors' assets…" (CLICK HERE for related article.)

However, also on January 12, the Committee filed an objection to the sale motion, opposing Arch's proposed sale of certain unencumbered assets, including certain avoidance actions "in the absence of any valuation evidence concerning the unencumbered assets to be sold and in the absence of any testimony concerning the proposed allocations of the purchase price for these particular unencumbered assets." The next day PNC filed an objection to the sale motion, stating, among other things, that the debtor could not sell its assets free and clear of its liens and that "the asset purchase agreement executed by the Stalking Horse was subject to numerous adjustments which make it impossible to determine the true purchase price of the assets and whether they were being sold for fair values." Regardless, on January 27, the court approved the sale and, according to court documents, resolved all objections.

According to the documents, in agreement with the settlement order, PNC consented to a "carve out of its cash collateral derived from the sale for the benefit of the general unsecured creditors in the amount of $1,250,000 plus an assignment of 100 percent of any recoveries PNC may receive in partial satisfaction of its allowed super-priority administrative expense claim … from recoveries by the debtors or their estates in respect of the Avoidance Action Payments." The amounts to be paid to the general unsecured creditors by PNC, from recoveries of the Avoidance Action Payments, comprise a carve out of PNC's court-approved, super-priority administrative expense claim recoveries.

In accordance with a later Administrative Claims Bar Order, PNC filed a "Motion to Establish the Amount of Pre-petition Agent's and Pre-petition Lenders' Allowed Administrative Expense Claim." The motion was followed by an objection from the administrative claimants and the committee of unsecured creditors. At the same time, the Debtors' filed a response to the requests for administrative claims.

At the June 29 hearing on the various objections, the committee announced that it, on behalf of all general unsecured creditors, the administrative claimants, PNC and the debtors had reached a settlement to resolve these items.

According to the court documents, the terms of the settlement note that PNC shall have an allowed super-priority administrative expense claim in the amount of $8,000,000. PNC has assigned to the general unsecured creditors any and all cash proceeds it receives on its allowed super-priority claim exclusively from the Avoidance Action Payments. The Committee, on behalf of the general unsecured creditors, has agreed to remit 30-percent of the funds received from PNC on the Avoidance Action Payments through the partial assignment to all creditors holding allowed administrative expense claims, with the general unsecured creditors retaining the remaining 70 percent of the Avoidance Action Payments. The Avoidance Action Payments shall be credited against PNC's allowed $8,000,000 super-priority administrative expense claim, as they are received, and PNC's super-priority administrative expense claim shall be reduced dollar for dollar on account of any and all Avoidance Action Payments.

According to the documents, "the proposed settlement resolves litigation as to both the amount of PNC's allowed super-priority administrative expense claim and the priority of distributions of the Avoidance Action Recoveries as between the Committee and the 503(b)(9) Creditors in accordance with the Settlement Order."

CLICK HERE to read the court document.

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