Cases & Deals

Chemtura plan confirmed and bondholders take majority equity stake in reorganized company

Client(s) Chemtura Corporation ad hoc bondholder committee

Jones Day successfully represented an ad hoc committee of bondholders in the Chemtura bankruptcy case, prevailing in a heavily-contested confirmation trial before Bankruptcy Judge Robert Gerber in the Southern District of New York. The Chemtura plan went effective on November 10, 2010, resulting in a recovery for bondholders in the form of both cash and stock in the reorganized company equal to 100% of principal, interest accrued both pre- and post-petition, $65 million in additional damages for the debt-equity conversion, and the reimbursement of at least $7 million in professional fees incurred by the ad hoc bondholders committee.

Chemtura and its subsidiaries and affiliates ("Chemtura") filed for Chapter 11 bankruptcy in March 2009. In September 2009, bondholders holding more than $750 million of Chemtura's funded unsecured debt formed an ad hoc committee of bondholders, hiring Jones Day as their counsel. Ultimately, the bondholder committee was able to negotiate a global settlement with Chemtura, the Official Committee of Unsecured Creditors and the Pension Benefit Guaranty Corporation. The global settlement resolved disputes over, among other things, Chemtura's enterprise value, the payment of additional" make-whole" and "no-call" damage claims that bondholders held against the company, a pay-down of pension obligations, the future corporate governance for Chemtura and appointment of a new board of directors. The Plan ensured Chemtura's future financial viability by converting the majority of the bond and other unsecured debt into equity, and obtaining new senior working capital financing, dramatically lowering Chemtura's debt burden and de-leveraging the company's balance sheet. The bondholders and other unsecured creditors also helped to facilitate the Debtors' settlement of disputed environmental and tort claims by agreeing that such claims may be paid in full in cash. With this concession, the Debtors were ultimately able to settle several billion dollars of claimed liabilities for less than $100 million in cash payments.

Chemtura filed its proposed plan of reorganization in June 2010. Chemtura's equity holders, led by the Official Committee of Equity Security Holders appointed in the case, opposed confirmation of the plan, resulting in substantial discovery over valuation and other issues over a compressed time period before the September Confirmation trial. The equity committee's primary objections were (1) that the proposed plan—premised on an enterprise value of $2.05 billion—undervalued the company by at least $400 million, thereby inflating bondholders' recoveries to the detriment of equity holders and (2) that Chemtura should have increased its post-emergence leverage in order to preserve existing equity interests.

On October 21, 2010, Judge Gerber issued a thorough, 78-page opinion, approving the global Settlement, the valuation in the Plan, Chemtura's decision to de-leverage its balance sheet, and confirming the plan over all objections. The Equity Committee ultimately agreed not to appeal, and Chemtura emerged from bankruptcy on November 10, 2010.

The bondholder committee was represented by restructuring attorneys Richard Wynne, Erin Brady, Lori Sinanyan, Lance Miller, Chris Healey, Lauren Buonome and Stacie Torres and by a litigation team of Steven Bennett, Lynn Marvin, Xochitl Strohbehn, Alan Rabinowitz, Briana Hulet, Jennifer Schramm, Helena Ajudua, Jesyka Harris, Meen-Geu Oh, and Kamilla Mamedova.

In re Chemtura Corp., Bankr. No. 09-11233 (Bankr. S.D.N.Y.)