BearingPoint gets court OK to sell its Public Service group assets

By Rebecca Melvin

New York, April 17 - BearingPoint Inc.'s request to sell its Public Service Industry Group to Deloitte LLP for $350 million was approved in bankruptcy court Friday over the objection of holders of $450 million of the company's convertible debt.

Judge Robert Gerber of the U.S. Bankruptcy Court for the Southern District of New York ruled that an expedited sale under section 363 of the bankruptcy code was in the best interest of the estate and its creditors as a whole, despite bondholders' arguments that value realized under a restructuring plan would be wiped out as a result of such a sale.

"The sale will effectively liquidate BearingPoint's businesses and wipe out hundreds of millions of dollars of value that the unsecured creditors should be able to realize under an appropriately timed sale or orderly restructuring," counsel for the bondholders' trustee told the court.

"This sale is going to result in little or no recovery for two-thirds of pre-petition debt holders," David Elkind of Ropes and Gray LLP, counsel for Law Debenture Trust Co. of New York, said.

"Debtors under the bankruptcy code are not allowed to gut an estate before reorganization," Elkind said, citing various cases in which such a sale wasn't allowed.

But judge Gerber said the court couldn't risk senior classes in trying to get a recovery for the junior classes.

The subdebt includes $250 million of 2.5% series A subordinated debentures due 2024 and $200 million of 2.75% series B convertible subordinated debentures due 2024.

Citing the value of the businesses employees among whom voluntary attrition has increased, and liquidity issues, Gerber ruled in line with an earlier decision on bidding procedures to sell the Public Service group.

"As much as I recognize the adverse consequences to them [the junior creditors] to approve a 363 sale, rather than waiting for maybe a better deal for the junior classes, there simply isn't enough value in the estate, and what value there is must be preserved and monetized," Gerber said.

"The business as a whole is a wasting asset, and while the PS [Public Service] asset is not wasting as much as the others, the debtors haven't been successful in meeting forecasts and liquidity is getting worse," Gerber also said.

Certain details of the sale order were yet to be worked out. For example, among assets being sold to Deloitte are avoidance actions against any counterparties to any counterparties to assumed contracts or designated client proposals

The company said it would be difficult to find a buyer who would agree to purchase engagements if clients and/or subcontractors would be subject to litigation.

Such litigation risk would likely damage the buyer's business and would deter any buyer, including Deloitte, from purchasing assets absent the inclusion of the avoidance actions relating to the purchased contracts among the assets being sold, BearingPoint stated in court documents.

BearingPoint is a McLean, Va.-based provider of management and technology consulting services. It filed for bankruptcy protection on Feb. 18, and its Chapter 11 case number is 09-10691.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.