In re M&G U.S. Corp.

599 B.R. 256
CourtUnited States Bankruptcy Court, D. Delaware
DecidedMay 6, 2019
DocketCase No. 17-12307 (BLS)
StatusPublished
Cited by2 cases

This text of 599 B.R. 256 (In re M&G U.S. Corp.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re M&G U.S. Corp., 599 B.R. 256 (Del. 2019).

Opinion

BRENDAN LINEHAN SHANNON, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the Motion of the Construction Lienholder Group for Allowance and Payment of Administrative Expense for Substantial Contribution [Docket No. 1555]. By this Motion, the Construction *259Lienholder Group2 seeks allowance and payment of professional fees and expenses in the aggregate amount of $ 1,591,036.86.3 The Construction Lienholder Group contends that it provided a "substantial contribution" in this case within the meaning of 11 U.S.C. § 503(b)(3)(D) in representing the interests of hundreds of creditors asserting mechanic's lien claims against the Debtors' Corpus Christi Plant. The Substantial Contribution Motion is supported by a number of mechanic's lien claimants, see Docket Nos. 2279; 2280; 2281; 2282; 2283; 2284; 2285; and 2291; and is opposed by the post-confirmation Litigation Trust and the United States Trustee. For the reasons that follow, the Court will grant the Substantial Contribution Motion.

BACKGROUND

M & G USA Corporation and its affiliates (hereinafter "the Debtors") were producers of polyethylene terephthalate resin ("PET") and one of its precursors, purified terephthalic acid ("PTA"). First Day Declaration of Dennis Stogsdill [Docket No. 3 at ¶ 8]. PET is a product used in the manufacture of plastic bottles and other plastic packaging. Id. In April of 2013, the Debtors began construction on a manufacturing plant in Corpus Christi, Texas, which was intended to be the largest production facility of its kind in the world (the "Corpus Christi Plant" or the "Plant"). Id. at ¶ 9. The Corpus Christi Plant was designed to be a vertically integrated plant, capable of manufacturing both PET and PTA on a single line. When construction began on the Corpus Christi Plant in 2013, the expected completion date was December of 2015. Id. Unfortunately, the record reflects that construction of the Plant was greatly delayed and far over budget, with catastrophic consequences for the Debtors.

On October 30, 2017, the Debtors filed for Chapter 11 protection. [Docket No. 1]. The Corpus Christi Plant remained substantially incomplete as of the Petition Date. First Day Declaration at ¶ 10. The Debtors claimed to be facing substantial liquidity concerns brought on, in large part, by delays in the Plant's completion. Id. at ¶¶ 10-11. The projected costs of the Plant's completion had more than doubled in the four years since the Plant began construction, increasing from $ 1.1 billion to nearly $ 2.4 billion. Id. at ¶ 39. In addition to the debt incurred for ballooning construction costs, the Debtors were not obtaining any revenue from the Plant to service existing debt, since the Plant remained uncompleted and inoperable. Id. at ¶ 11.

In their First Day Declaration, the Debtors pointed to multiple factors contributing to the years-long construction delay: labor costs had been underestimated; design and technical problems necessitated changes; and damage and disruption from Hurricane Harvey had further impacted the project. Id. at ¶¶ 10; 39. Most significant for this proceeding, though, the Debtors reported that they were engaged in "disputes with [Debtors'] prior engineering, procurement and construction firms" which ultimately led to hundreds of millions of dollars in mechanic's liens being filed against the Corpus Christi Plant. Id.

Some, but not all, of those mechanic's lienholders formed an ad hoc committee soon after the Petition Date in order to participate in the bankruptcy proceedings (the "Construction Lienholder Group" or the "CLG"). The membership of the CLG has varied throughout the proceedings, *260and has not at any point comprised the universe of all mechanic's lienholders. [Docket No. 2274 at ¶ 1]. Instead, it has consisted of a number of lienholders and claimed to represent the interests of all lienholders who were similarly situated. Id. To assist it with its work, the CLG retained counsel, Morris James LLP, as well as Province, Inc., a financial advisory firm.

The CLG filed a motion seeking to be appointed as an official committee pursuant to 11 U.S.C. § 1102(a) approximately a month after the Debtors filed their petitions. [Docket No. 246]. That motion was opposed by the Debtor, the Unsecured Creditor's Committee, and the Debtors' senior lenders. After an extensive hearing, the Court denied the motion, declining to allow the CLG to operate as an official committee. Transcript of December 11, 2017 Hearing [Docket No. 461 at 118-21]. Ruling from the bench, the Court found that the appointment of an official committee to represent the interests of the mechanic's lienholders was not warranted given the relevant facts. In so ruling, the Court noted the heavy burden imposed by 11 U.S.C. § 1102(a) and applicable case law for the appointment of additional official committees. Id.

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Bluebook (online)
599 B.R. 256, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-mg-us-corp-deb-2019.