When I first heard about the bankruptcy filing of Freedom Industrie on Chris Hayes show, I couldn't quite understand some details that related to the incorporation of another company, Mounteneer Funding LLC by the same person, Cliff Forrest, who owns Freedom Industries.
Here is the part of the transcript of Chris Hayes show that puzzled me and which I wanted to understand:
Freedom industries filed for chapter 11 bankruptcy. In a move that appears designed to help protect it from creditors and more than two dozen lawsuits that residents and business owners have already filed. In fact, if today's court filings are to be believed, it's a staggeringly brazen attempt to do just that.
When a company files for chapter 11, it has to find another company, a financer, to lend it the money to restructure. And in exchange for lending money to a company in such dire straits and bankruptcy, that entity, the one doing the lending, gets first dibs at the company's assets if that company goes totally under.
Well, today, as twitter user nycsouthpaw first pointed out, a company called Mountaineer Funding LLC stepped up to provide Freedom Industries with its bankruptcy funding.
Mountaineer Funding is not a very well-known company for the simple reason that it hasn't existed before today. That's right, Mountainneer Funding, LLC, incorporated today. And the first person listed as its officer, one of only two officers, is a man by the name of J. Clifford forrest. And if the name cliff forrest rings a bill, it might be because Cliff Forrest is the man identified in today's " washington post " as the current owner of -- you guessed it -- Freedom Industries.
So here's what it looks like is being set up to happen. Freedom Industries, with its massive legal liability for taking out a sixth of West Virginia 's water supply, is quietly killed, filing for bankruptcy. Its assets are taken over by a company that gave it bankruptcy financing. That company is called Mountaineer Financing, and it's owned by a man, whose name bears a striking resemblance to Freedom Industry's current owner. Mountaineer Funding LLC emerges from the ashes with the same assets, but without all that nasty legal baggage.
"coffeetalk" explained to me here that in a bankruptcy,
the COURT controls the "Debtor's estate.:
No -- maximizing the Debtor's estate (2+ / 0-)
in the bankruptcy context means getting the most money together to pay the people that the Debtor owes money to -- including, in this case, the people who suffered because of the water contamination.
In a bankruptcy, the COURT controls the "Debtor's estate." The Court's job is to see that the creditors -- the people owed money -- get paid. A Chapter 11, where the Debtor continues operating, is what they allow if the Court believes that the entity can best pay off debts by continuing to operate. It may converted to a Chapter 7 if it's determined that there's no way they can come close to ever paying off all creditors. In that case, the Court will still "maximize the Debtor's estate" -- i.e., get together as much money and assets possible in the Debtor's estate for paying off as much of what the Debtor owes as possible.
Either way, the Debtor's estate is first and foremost for paying the creditors.
by coffeetalk on Sat Jan 18, 2014 at 09:21:51 AM EST
Coffeetalk also
said that:
Forrest is taking a huge loss here, it seems. (2+ / 0-)
There's no profit in this for him. It appears that he bought a company for $20 million, and that $20 million disappeared in a matter of days, since the company he bought is now in bankruptcy.
Some people seem to regard this kind of bankruptcy as a corporate ploy to increase profits. The owners of a company that files for bankruptcy are one of the losers. The bankruptcy judge now gets to oversee what happens, and his/her job is to see what's the best avenue for paying off the creditors - and the creditors, I suspect, will include the people who were hurt by the water contamination. The fact seems to be that this company does not have the money and/or assets to pay those debts.
by coffeetalk on Sat Jan 18, 2014 at 09:06:09 AM EST
That still left my question unanswered what the role of Mounteneer Funding LLC is. The way I understood it, the company would provide funds to help restructure Freedom Industries in a way that it is able to continue to operate and be able to meet the obligations it has to its creditors.
Where does the money come from that Mounteneer Funding LLC is supposedly giving? Is he "giving" the money he had invested in Freedom Industries when he bought it, back again to Freedom Industries as new owner of Mounteneer Funding?
Or is there other money Mounteneer Funding gets by establishing its corporation as a "funding" company, as a financier to help restructure bankrupt Freedom Industries?
VClib says here:
The money for MF, LLC is coming from the owner (2+ / 0-)
of Freedom, but through an independent entity. I am no expert but when a company goes into Chapter 11 it still needs cash to operate. If an entity is willing to loan Freedom money while they are in Chapter 11 that group becomes the senior creditor. By having MF step in as the lender of last resort the owner of both Freedom and MF continues to control all the assets. However, the funding of MF is new cash the owner it putting at risk. The cash didn't come from Freedom. This is all very common and legal.
I don't understand this comment as on the one hand it says "the money for Mounteneer Funding is coming from the owner of Freedom Industries" (which has none) and on the other hand it says "The cash didn't come from Freedom."
So, where does the cash come from?
I hoped to understand this when I read the article I quote below.
Freedom bankruptcy unlikely to delay cleanup
In this article there are a couple of things explained that brings me a bit closer to understand how that bankruptcy process is going forward:
A bankruptcy filing puts a temporary hold, or stay, on all claims for a company to pay its debts.
...
But there is an exception in bankruptcy code so that government agencies can exercise "police powers," which would likely include environmental cleanup.
...
DEP Secretary Randy Huffman elaborated.
"At this point, Freedom has committed to continuing its cleanup effort. Any contingency to that would consist of a plan developed by many parties including the DEP," Huffman wrote.
...
On Friday evening, a spokesman for the state Department of Environmental Protection released a statement in all capital letters that said, "A company's bankruptcy status does not absolve it of its environmental remediation obligations."
...
Shortly after Freedom filed for bankruptcy on Friday, the company also filed what's called a "debtor-in-possession," or DIP, agreement, which would allow it to secure an emergency loan to continue functioning.
...
In the DIP agreement, Freedom specifies three "permitted liens," which will likely get first priority when Freedom begins to pay back its creditors.
...
After the "permitted liens," the next creditor in line is almost always the DIP lender, Simons said. Simons said that the DIP lender is given priority because they put money in when the company was most at risk.
...
The exact identity of Freedom's DIP lender is a little opaque.
...
The listed lender is WV Funding LLC, a company that was not listed with the West Virginia secretary of state on Friday. Updated listings now show that it was incorporated on Friday, the day Freedom filed for bankruptcy.
...
WV Funding's one listed member is a company called Mountaineer Funding, LLC.
...
Mountaineer Funding was also founded on Friday, according to secretary of state filings. There is also a space for Mountaineer Funding to sign on the DIP agreement.
...
Mountaineer Funding's one listed member is J. Clifford Forrest.
A source close to Freedom, who refused to be identified because of pending litigation, confirmed that Forrest owns Chemstream Holdings, Freedom's parent company, although that could not be confirmed.
...
Chemstream Holdings also shares a Pennsylvania address with Rosebud Mining Company, which lists Forrest as its president.Rosebud Mining owns 28 coal mines and eight coal preparation plants ... It is the third largest coal producer in Pennsylvania, the fourth largest in Ohio. ...Forrest also owns The Lodge at Glendorn, a 1,280-acre luxury resort in northern Pennsylvania with rooms and cabins that book for between $450 and $1,395 per night.
...
Separate companies, even with the same ownership, are generally not liable for one another's debts in bankruptcy filings.
...
"Superficially, right now, it would seem like only Freedom's going to be liable," Simons said. "But if you find that another company is virtually the altar ego of one company, then they're as liable as the one company."
So, I guess I am two steps further ahead to understand the following:
This Cliff Forrest guy is rich. He owns a lot of stuff. He puts in his own money from other resources he has. So, I guess the money he is now funding into his own bankrupt Freedom Industries comes from assets he has through those mining companies and luxury resorts. He incorporated as a Mounteneer Funding LLC, because he hopes that as a separate corporation he will not be hold liable for the debt of his Freedom Industries LLC. That again is up to the Court to decide.
Tell me, if I got that right so far. Are there not some perks his new company can get from the government? Something?
I am just writing this out for the record so that I can go back to it later and not forget it.
Strange how things work. I wonder what the court decides and if the justices on that court are elected and if they have to take campaign money from the coal industries.
I hope not. Hopefully Mounteneer Funding LLC will be liable for the debt of Freedom Industries.
I feel like I have to be a lawyer to understand how this country works. Darn. Too late. German Dumpkopfen (and blonde ones especially) have a hard time to survive in this legal maze. So, nothing here to see. Go on. Just a diary for my own pleasure.