Situation:
Harney Partners was retained for bankruptcy consulting by serial entrepreneur who was facing the triggering of large personal guarantees on real estate leases and mortgages related to a chain of dine-in movie theaters that were shut down due to the COVID-19 pandemic. In addition to owning and operating the movie theater chain, the Debtor owned and operated various commercial real estate, hotel, and investment businesses.
Harney Role:
Assisted counsel and debtor in filing of chapter 11 subchapter V case to address the large overhang of personal guarantees. Because the personal guarantees had not been triggered, those debts were contingent and unliquidated as of the Petition Date, allowing our client to qualify for the benefits of the new subchapter V of chapter 11. Subchapter V allows for debtor to pay projected disposable income over 5 years while maintaining equity interests. As financial advisor, we analyzed the financial condition of the Debtor and his various businesses and developed financial projections for the Debtor’s disposable income, which consisted of wages, distributions from the various businesses, interest and dividend income, offset by his and his spouse’s living expenses.
Result:
The Debtor’s Plan of Reorganization was confirmed. To gain credit buy-in, the Debtor agreed to pay the aggregate amount of projected five years of disposable income by the end of 2021. If the Debtor successfully makes these payment, he will receive a discharge of the personal guarantee liability (and the other unsecured debts as of the Petition) while retaining his equity interests in various businesses and investments in marketable securities.
