Chapter 7 Preparing to Vote on a Chapter 11 Plan: Solicitation, Balloting and Tabulation

• Jurisdiction: United States

7. Preparing to Vote on a Chapter 11 Plan: Solicitation, Balloting and Tabulation

Written by:

Kate Logan¹

Logan & Company Inc.; Montclair, N.J.

Implementing a creditor-accepted, court-confirmed reorganization plan in a chapter 11 case is the goal of every distressed company attempting to press the reset button. Negotiating, drafting and finalizing the disclosure statement and plan are such herculean tasks, you do not want to risk a plan failure resulting from a flawed voting process. Ensuring confirmation with a voting process that accommodates the unique circumstances of your debtor and its voting population requires preparation, preparation and, yes, more preparation.

The voting process presents many challenges to a reorganizing company, its counsel and its claims and balloting agent. Helping the claims and balloting agent perform his or her duties expeditiously and at minimal cost will require counsel's planned consideration. Many of the questions—determining who can vote, in what amount and in what case, and which ballots are to be tabulated —are not always answered by the Bankruptcy Code and Rules. In the context of a particular case, there may be issues that can only be addressed by the bankruptcy court pursuant to a well developed voting procedures order. Anticipating obstacles to an efficient ballot delivery and return will prevent jeopardizing the plan confirmation. Expediting the claims-objection process, carefully preparing the voting database and developing explicit and case-specific solicitation and tabulation procedures will assure positive results to that end.

The importance of communication among the debtor, its counsel, and its claims and balloting agent cannot be overstressed. Inform your claims and balloting agent with early drafts of the plan classification scheme and the solicitation and tabulation procedures so that the complexities of the voting process are not a last-minute surprise either to the agent or to you. Just as you will need to know the class, quantity and value of the claims pool to draft a credible plan, so too the balloting agent will need to know if it will be mailing a 600-page document to 50,000 people within a short timeframe.

A. Determining Who Will Vote and How

The goal of the voting process is to satisfy the Code's requirement for a minimum level of creditor support for the plan. That minimum level consists of having at least one impaired accepting class of claims, with acceptance determined by "yes" votes cast by creditors who hold at least two-thirds in dollar amount and more than one-half in number of the allowed claims who vote in the class, excluding the votes of insiders. Accordingly, both the dollar amount voted and the number of votes are very important. For the creditor classes, the Code provides that only holders of allowed claims are entitled to vote on a plan, consisting of filed and, to the extent not filed, scheduled claims. Filed claims are deemed allowed as filed unless they are the subject of an objection or have been withdrawn, disallowed or otherwise adjusted by court order. For scheduled claims, the schedules of liabilities constitute prima facie evidence of the validity and amount of the claims, which can be...