The amount of prebankruptcy work going on before a debtor files its petition is often substantial, especially in the case of a prenegotiated or prepackaged reorganization plan. But American LaFrance LLC and BHM Technologies Holdings Inc. have taken prework to the next level, given that both of them came to the U.S. Bankruptcy Court not only carrying a plan, but a backup proposal as well.
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Indeed, it is somewhat ironic that American LaFrance stands on the precipice of exiting Chapter 11 Thursday, given its similarities to BHM, which filed for Chapter 11 Wednesday. American LaFrance, the venerable rescue vehicle manufacturer, had a confirmation hearing scheduled Thursday in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. American LaFrance's case has been something of a novelty in that it filed a plan that refinances its senior debt at the same time it submitted a bidding procedures motion to conduct a sale to Patriarch Partners LLC.
American LaFrance's strategy? If the plan goes bust, at least it can pursue the sale. And it will, in fact, if its plan isn't confirmed.
Ionia, Mich.-based BHM looks like it was taking notes. Although the auto parts supplier isn't planning to hold an auction, it appears to have done American LaFrance one better. BHM filed a term sheet for not only one reorganization plan, but two. The first revolves around a $12.5 million equity infusion from its private equity owner, First Atlantic Capital Ltd., and the second one doesn't. Like American LaFrance's bid procedures motion, the second plan is something of a precautionary measure. Though BHM prefers its so-called "new money" proposal and an infusion from First Atlantic, it is hedging its bet in the event that the court rejects the plan or the proposal isn't consummated.
Will dual debtor plans, or better, fallback debtor plans, become the norm? It's a trend worth watching. - Ben Fidler
