ConvergeOne Excluded Lenders Leverage Fifth Circuit’s Serta Ruling in Plan Confirmation Appeal, Insisting Majority Lenders’ ‘Exclusive Investment Opportunity’ Violates Equal Treatment

Relevant Document: Notice of Supplemental Authority The ConvergeOne ad hoc group of excluded lenders is leveraging the recent Fifth Circuit Serta decision as authority applicable to its own appeal of the bankruptcy court’s confirmation of the debtors’ prepackaged plan, arguing that the plan impermissibly gave majority lenders favorable treatment on account of their claims, according to a filing this afternoon. The majority lenders received the exclusive right to fund the debtors’ rights offering, the excluded lenders say, resulting in substantially greater recovery to the majority lenders than to the excluded lenders on the very same claims. This result, the ad hoc group emphasizes, implicates the Serta ruling, under which the debtors’ plan violates the equal treatment provision of the Bankruptcy Code because it favors majority lenders over excluded lenders. The excluded lenders’ plan confirmation appeal is pending before U.S. District Judge Andrew S. Hanen. In October 2024, Judge Hanen denied the debtors’ motion to dismiss the appeal. In rejecting the debtors’ argument that the appeal was equitably moot because of consummation of the plan, the judge found that potential relief can be granted on appeal without unwinding the plan via “discrete payment and sale of certain equities.” The excluded lenders[...]