Commercial Bankruptcies: Examiners in a Chapter 11 Case

The items below are excerpted from the Business Bankruptcy News Bulletin. A full issue contains information on dozens of troubled companies, as well as informational and analysis highlights. Please visit the insideARM bookstore for information on subscribing to the Bulletin.

The appointment of an examiner in a Chapter 11 case is rare. The role of an examiner is generally more limited than that of a trustee. The examiner is authorized to perform the investigatory functions of the trustee and is required to file a statement of any investigation conducted. If ordered to do so by the court, however, an examiner may carry out any other duties of a trustee that the court orders the debtor in possession not to perform. Each court has the authority to determine the duties of an examiner in each particular case. In some cases, the examiner may file a plan of reorganization, negotiate or help the parties negotiate, or review the debtor’s schedules to determine whether some of the claims are improperly categorized. Sometimes, the examiner may be directed to determine if objections to any proofs of claim should be filed or whether causes of action have sufficient merit so that further legal action should be taken. An examiner may not serve as a trustee.

Attorney-Client Privilege in a Bankruptcy Case

Under federal common law, attorney-client privilege is both subjective and objective.  While the privilege applies to communications that are made in confidence by the client in the course of seeking legal advice from a lawyer and his or her capacity as advisor, it applies only when invoked by the client and is not waived.  As such, a document is not rendered privileged simply because it is sent to an attorney.  With this in mind it is important to note that the attorney-client privilege is determined on a document by document basis and any blanket claim of attorney-client privilege is insufficient as determined in the United States vs. White in the seventh circuit court.

Affiliated Media Inc., a holding company for newspaper publisher MediaNews Group Inc., won approval from its lenders for a restructuring plan and has now, as expected, filed a prepackaged Chapter 11 petition. According to the plan, a debt-for-equity swap will slash Affiliated’s debt from $930 million down to $165 million. The filing was made in the U.S. Bankruptcy Court in Delaware under case number 10-10202.

Freedom Communications Inc., an Irvine, Ca. newspaper publisher, filed its reorganization plan and could emerge soon from bankruptcy protection. Freedom’s plan calls for slashing its debt from $770 million down to $235 million in a deal that will hand over 100% of the stock of the reorganized firm to secured lenders. A confirmation hearing is scheduled for 3/9. For further information contact the U.S. Bankruptcy Court in Wilmington, De. at 302-252-2560.

Morris Publishing Group, which filed a prepackaged Chapter 11 last week, has seen the U.S. Bankruptcy Court schedule a confirmation hearing for 2/17. 

Uno Restaurant Holdings Corp. is hoping that its bankruptcy reorganization will be smooth and swift, emphasizing that while its balance sheet needs fixing its brand remains strong. The Roxbury, Ma.-based operator, which recently filed Chapter 11 with a prepackaged plan in agreement with its bondholders, has asked for court approval of a $52 million debtor-in-possession financing package. Uno says it has been hurt by a drop in consumer spending amid the recession, losing $22.2 million in 2009 and $15 million in 2008. For more information contact the U.S. Bankruptcy Court in Manhattan, N.Y. at 212-668-2780 and refer to case number 10-10209.

Tribune Co., the newspaper and broadcasting firm which is operating under Chapter 11 protection, has seen the U.S. Bankruptcy Court approve more than $45 million in bonuses for company executives. The ruling was made over protests from union officials and federal bankruptcy monitors.