WILMINGTON, Del. (HedgeWorld.com)–Lawyers for the bank debtors in the Owens-Corning bankruptcy want to expedite the appeal of a recent U.S. District Court decision that went against the interests of their clients.
They have asked the 3rd U.S. Circuit Court of Appeals to hear oral arguments in early January 2005.
It is necessary for the appellate court to act quickly, said the bank debtors, through their law firm Weil, Gotshal & Manges LLP, in a court filing. Otherwise the District Court’s decision for substantive consolidation of the estates of various corporate entities under the Owens-Corning umbrella will “have the effect of chilling the commercial finance market because the District Court’s reasons for granting substantive consolidation here easily apply to most of corporate America.”
On Oct. 5, 2000, Owens Corning, Toledo, Ohio, and 17 subsidiaries filed voluntary petitions for relief under Chapter 11 in the U.S. Bankruptcy Court in Wilmington, Del. A consortium of banks, led by Credit Suisse First Boston, strenuously opposed consolidation, on the basis of a 1997 credit agreement in which the parent and its subsidiaries cross-subsidized one another’s loans. It argued that this gave some unsecured creditors a position superior to that of other unsecured creditors and that a consolidation would work an injustice.
On Oct. 5, Judge John P. Fullam of the U.S. District Court for the Eastern District, Pennsylvania, ruled for consolidation nonetheless (see ).
“Unless this decision is reversed on appeal, it will curtail unsecured credit, because lenders at virtually any major corporation could lose credit enhancements without any clear legal standards,” said Martin Bienenstock, of Weil Gotshal, in a statement Oct. 13. Counsel for Owens-Corning, Saul Ewing LLP, Wilmington, referred a request for comment to the debtors’ media relations office, which had none.