The U.S. Bankruptcy Court issued an order denying the motion of individual parties Shirley Fenicle, David William Fahy, John H. Jones and David Heinzmann to dismiss the Chapter 11 cases of Energy Future Holdings’ “Asbestos Debtors”: EECI, EEC Holdings, LSGT SACROC and LSGT Gas on the grounds that the bankruptcy petitions were not filed in good faith.
The order states, “The evidence clearly establishes that based on the totality of the circumstances the LSGT Debtors’ bankruptcy petitions were filed in good faith because the filing was for a valid bankruptcy purpose and not as a litigation tactic. The LSGT Debtors’ bankruptcy was filed for three primary purposes. First, they were filed to avoid immediate cash flow insolvency….Second, the Debtors as a whole were facing the prospect of a huge $6.5 billion deconsolidation tax for which three of the LSGT Debtors would have been jointly and severally liable.”
The order continues, “Third, the LSGT Debtors filed bankruptcy in the hope of negotiating a resolution in bankruptcy that would maximize both the value of their assets and the recovery on their asbestos related claims….The plan currently before the Court and scheduled for confirmation in February 2017 provides just that, even though EFH Corp.’s other unsecured creditors are impaired to the tune of ten cents on the dollar and all other intercompany claims are being discharged.”
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