Rotech judge: Debtor insolvent; trustee to disband equity committee

By Jim Witters

Wilmington, Del., Aug. 26 - Rotech Healthcare Inc. is an insolvent debtor and the Chapter 11 case needs no official equity committee, a judge ruled during an Aug. 26 hearing in the U.S. Bankruptcy Court for the District of Delaware.

Judge Peter J. Walsh issued a summary judgment based on the conclusions of three valuation reports.

A report commissioned by Rotech placed the value of the company at $450 million to $525 million. A report from the official committee of unsecured creditors pegged the value at $450 million to $540 million. And the valuation presented by the equity committee concluded the company is worth $509 million to $801 million.

The undisputed debt level for the company is $647.5 million, excluding a disputed make-whole payment of $57 million asserted by the second-lien noteholders.

Rotech attorney Martin Bienenstock said it would be "a legal impossibility" for the court to declare Rotech solvent based on those reports.

Walsh concurred without further comment.

Juliet Sarkessian, representing the U.S. Trustee's Office, said the trustee would disband the equity committee based on the court's ruling.

"The solvency issue has been the bugaboo in this case and has been the only obstacle to confirmation of a plan," Bienenstock told the court.

Given the ruling and the disbanding of the equity committee, Bienenstock said, the plan confirmation hearing scheduled to begin Aug. 29 should last about half a day instead of the two full days scheduled.

All plan objections other than those from the equity committee are resolved, he said. And Walsh's ruling mooted the equity committee's objections.

Rotech attorneys argued from the case's inception that the company is insolvent and that funding an equity committee was a waste of estate resources because there was no chance for a recovery for holders of equity interests.

Rotech, an Orlando, Fla.-based provider of home medical equipment and related products and services, filed for bankruptcy on April 8. Its Chapter 11 case number is 13-10741.

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