Several individual parties filed with the U.S. Bankruptcy Court a motion to dismiss the Chapter 11 cases of Energy Future Holdings’ “Asbestos Debtors”: EECI, EEC Holdings, LSGT SACROC and LSGT Gas Co. on the grounds that the bankruptcy petitions were not filed in good faith.
According to documents filed with the Court, “The Asbestos Debtors did not file the petitions for a valid reorganizational purpose….Under controlling Third Circuit law, this is not a proper reorganization purpose. And it is inimical to the fundamental principle that bankruptcy must not be used to obtain a windfall at the expense of creditors….The Asbestos Debtors had been sued pre-petition for asbestos-related injuries associated with the Asbestos Debtors’ electricity generation activities and discontinued gas distribution businesses.”
The motion continues, “They have assets of at least $990 million in admittedly valid inter-company claims, which are reinstated by the Plan. The Debtors have estimated that their annual costs for resolving asbestos claims are approximately $3 million each year….The Plan provides that the Asbestos Debtors would remain separate corporate entities, wholly-owned by reorganized EFH Corp. which, in turn, will be wholly owned by NextEra, Inc. All EFH Debtor Intercompany Claims (Class A3), and interests in the EFH Debtors other than EFH Corp. held by the Asbestos Debtors would be reinstated. All General Legacy Unsecured Claims, including Asbestos Claims (Class A3) against the Asbestos Debtors also would be reinstated. Thus, the only practical effect the Plan would have on the Asbestos Debtors is that it would allow them to shed their future liabilities for un-manifested Asbestos Claims, without compensation.”
In addition, “Indeed, the Asbestos Debtors’ only apparent purpose for seeking to maintain Chapter 11 protection is to cleanse themselves of future liabilities, thus unfairly and improperly benefitting their controlling parent, EFH Corp., at the expense of their asbestos victims, in direct contravention of the fundamental principle of bankruptcy that creditors be paid before stockholders retain equity.”
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