Delaware Business Bankruptcy Report : Delaware Business Bankruptcy Report : Morris James LLP Lawyers & Attorneys

Edwards v. New Century Mortgage Corp., et al. (In re New Century TRS Holdings, Inc.), Adv. Pro. No. 08-50000 (KJC) (February 2, 2010).

On April 2, 2007, New Century Mortgage Corporation and its affiliates (the "Debtors") filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code. On January 3, 2008, Gary Forrest Edwards ("Plaintiff" or "Edwards") commenced an adversary proceeding against the banks, individuals, and Court he held responsible for the foreclosure on his home. Edwards later filed an amended complaint, which contained a litany of requests for relief in connection with the state court mortgage foreclosure action. Various Defendants filed motions to dismiss for lack of subject matter jurisdiction, asserting that the Rooker-Feldman doctrine applied, and arguing that the complaint failed to state a claim upon which relief may be granted.

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On February 3, 2010, Spheris Inc. and 5 direct and indirect subsidiaries filed chapter 11 cases in the Bankruptcy Court for the District of Delaware. The case has been assigned to the Honorable Kevin Gross and is designated case no. 10-10352.

Mr. Robert L. Butler, CRO of the debtors, notes in his first day affidavit that the debtors “provide clinical documentation technology and services to health systems, hospitals and group medical practices located throughout the United States.” Events leading to the filings included changes in the clinical documentation industry including “significant technology developments as well as accelerated price pressures.” This resulted in declining revenues in the second half of 2008 and into 2009.

The debtors initiated a marketing strategy to sell all or substantially all of their assets. At the conclusion of that process, the debtors determined that a sale to CBay, Inc. and Medquist Transcriptions, Ltd. was the best opportunity and commenced the filing to consummate that sale transaction.

A Wall Street Journal article about the proposed sale can be found here.

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On February 3, 2010, Neenah Enterprises, Inc. and 17 of its affiliates sought chapter 11 bankruptcy protection in Delaware. The case has been assigned to Judge Mary F. Walrath, and has been designated case no. 10-10360.

According to the first day affidavit of Robert E. Ostendorf, Jr., President and CEO of the debtors, the debtors are one of the largest independent foundry companies in the U.S. and are one of the leading suppliers of castings to the domestic municipal products markets.

According to Mr. Ostendorf, reasons for the filing include “dramatic cyclical declines in some of the Company’s most important markets including trucks, railroad, construction, and agricultural equipment.” Additionally, there was a slow down in the orders placed by manufacturers in the residential segment leadings to lower demand for HVAC equipment, and increasing pressure from competitors and customers leading to reduced prices.

Prior to filing the bankruptcy cases, the debtors entered into a lock-up agreement with certain creditor constituencies to support a pre-negotiate plan that contemplates, among other things, according to Mr. Ostendorf, payment in full or reinstatement of the Prepetition Working Capital Lenders, exchange of Secured Notes for 97% of new common stock to be issued by the company, exchange of the Subordinated Notes for 3% of the company’s new common stock on the terms set forth in the Plan Term Sheet. Claims of general unsecured creditors are contemplated to be either reinstated or paid in full. Claims and interests of the company’s existing equity holders will be cancelled and extinguished.

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