Bankruptcy

The Problem with Houston

By Stephen Lubben

Two recent decisions from the bankruptcy courts in the Southern District of Texas have me wondering if Houston will become shunned as a locale for large chapter 11 cases. First, in In re Gulf Coast Oil Corp., the bankruptcy court held that 5th Circuit jurisprudence on 363 sales means that sales are less likely to be approved in that Circuit as compared with the 2d Circuit. The court does urge the 5th Circuit to "take another look" at the issue.

Next, in a decision in In re Energy Partners, Ltd., the bankruptcy court rejected an effort by committees to retain dueling, highly compensated valuation experts. While this result is undoubtedly correct, language in the opinion to the effect that professionals in chapter 11 should act "frugally" to ensure the debtor's reorganization -- and comparisons to the movie Wall Street -- give the impression that the court is unlikely to approve "New York" rates.

We can debate whether corporate debtors should have the ability to choose their jurisdiction, but under current law they certainly have such an ability and neither of the foregoing opinions are going to endear Houston to the "big case" bankruptcy bar. I've posted both opinions below.

Download Energy Partners

Download Gulf Coast

Full post as published by Credit Slips on August 10, 2009 (boomark / email).