Cases & Deals

Spansion Japan settles claims against former parent

Client(s) Spansion Japan Limited

Jones Day represented Spansion Japan Limited ("Spansion Japan") in the bankruptcy case of its former parent, Spansion LLC, allowing Spansion Japan to successfully reorganize in Japan. It is expected that, once approved by the Tokyo District Court, Spansion Japan will be able to make distributions to its unsecured creditors that will result in a substantially higher recovery to unsecured creditors as compared to other corporate reorganization proceedings under Japan's Kaisha Kosei Ho in recent history. The most recent settlement, involving the resolution of Spansion Japan's rejection damages claim for Spansion LLC's rejection of a foundry agreement between the parties, was approved by both the Tokyo District Court and the United States Bankruptcy Court for the District of Delaware on October 25 and 26, 2010, respectively.

Spansion LLC and several affiliates commenced their chapter 11 bankruptcy cases on March 1, 2009. After Spansion LLC sought to reject the Foundry Agreement, in November 2009, Spansion Japan sought payment for the wafers it sold to Spansion LLC between March 1 and October 26, 2009 as an administrative expense in Spansion LLC's chapter 11 case. While litigation ensued between the parties over the amount of Spansion Japan's administrative expense claim, Spansion Japan was able to negotiate a settlement that resulted in a substantial cash payment and a new foundry arrangement between the parties that enabled Spansion Japan to successfully reorganize in its corporate reorganization proceeding before the Tokyo District Court, leaving Spansion Japan's claim in excess of US$900 million for rejection damages arising from the rejection of the original foundry agreement to be decided later.

Spansion Japan then litigated against Spansion LLC and its committee of unsecured creditors over the classification and treatment of the rejection damages claim and obtained a favorable ruling from the Honorable Kevin J. Carey of the United States Bankruptcy Court for the District of Delaware, which required Spansion LLC to classify and treat the rejection damages claim equally with all other general unsecured claims, including a reserve of stock equal to the amount of the rejection damages claim. Then, after several months of intense, expedited litigation, Spansion Japan successfully negotiated a resolution of its rejection damages claim (and the dismissal of various avoidance actions commenced against Spansion Japan) resulting in an immediate $100 million cash payment to Spansion Japan.

Spansion Japan was represented by a Jones Day litigation and restructuring team composed of attorneys in Columbus, New York and Tokyo: Pedro A. Jimenez (New York), Robert W. Hamilton (Columbus), Kaoru Umino (Tokyo), Todd S. Swatsler (Columbus), Ross S. Barr (New York), Nathan S. Roth (Tokyo), Michael D. Silberfarb (New York), Benjamin Rosenblum (New York), Justin F. Carroll (New York), Nicholas C. Kamphaus (New York), Laird E. Nelson (New York), Jeffrey D. Jones (New York) and Helena Ajudua (New York).

In re Spansion Inc., et al. and The Claims Agent of Spansion Inc., et al., Case Nos. 09-10690 and 10-51300 (Bankr. D. Del.)