SunEdison Letter to Judge Morris

May 8th 2017

Click this link for full letter: SunEdison Letter to Judge Morris re Mediation 5 8 17 v2

 

Dear Chief Judge Morris:

 

We are counsel to the ad hoc committee of equity interest holders (the “Ad Hoc Shareholder Committee”) in the Debtors’ chapter 11 cases.  Supported by over 1,000 individual investors in SunEdison, the Ad Hoc Shareholder Committee and its cadre of allies represent approximately 8 percent of SunEdison’s total outstanding shares.  This is a “grassroots” group that has pooled their resources to have a voice in these cases – in some cases, tapping home-equity lines or invading retirement funds for this purpose.

 

On May 8, 2017, the Ad Hoc Shareholder Committee filed its preliminary objection to approval of the Debtors’ Disclosure Statement (the “Objection”),[1] a copy of which is enclosed.  By Order entered on April 18, 2017 [Docket No. 2795] (the “Mediation Order”), the Court referred, inter alia, all issues related to the Plan[2] and Disclosure Statement to Mediation and appointed Your Honor as the Mediator.  Given the Objection, and for the other reason set forth herein, we respectfully request that the Ad Hoc Shareholder Committee be included as a Mediation Party and permitted to participate in all aspects of the Mediation.

 

As Your Honor is aware, the Debtors’ cases are rather extraordinary, not only in the complexity and scope of the Debtors’ domestic and international operations, but the myriad allegations of pre-petition irregularities and mismanagement of the Debtors’ affairs.  Early in the case, Judge Bernstein issued an order to show cause why an official committee of equity security holders should not be appointed [Docket No. 356].  While Judge Bernstein concluded at the time that shareholders had not shown that their interests were not adequately represented, he was also clear that shareholders could be heard in the case individually or through an ad hoc committee.  (See Docket No. 975, p. 16-17).  Formed in the wake of that ruling, the Ad Hoc Shareholder Committee monitored the case from the sidelines and was not an active participant – until now.

 

As detailed in the Objection, the Ad Hoc Shareholder Committee is now stepping forward because it is impossible to review the Disclosure Statement and Plan and understand what transpired – either with respect to the events leading up to the filing of the Debtors’ chapter 11 petitions, or within these chapter 11 cases themselves. The facts are stark:  the Debtors raised $24 billion between 2103 and 2016, and though they claim they cannot repay one-quarter of that amount, the Disclosure Statement makes no effort to explain where the money went.  Shareholders are being asked simply to accept without explanation that billions of dollars have disappeared, wiping out their investments.  Absent a basic understanding of where the value went – and what led to the filing of a liquidating Plan –  the Ad Hoc Shareholder Committee is contemplating an aggressive campaign in opposition to confirmation.

 

As Your Honor has recognized,  “[m]ediation permits, indeed often requires, consideration of underlying interests, causes or values that produce conflict and thus permits the management, handling or resolution of broader concerns than just those ‘disputes’ which crystallize at the tip of the iceberg.”  In re A.T. Reynolds & Sons, Inc., 424 B.R. 76, 84 (Bankr. S.D.N.Y. 2010) (internal citations omitted).  In line with this, we believe that all parties would be best served at this stage of these cases with participation in the Mediation by the Ad Hoc Shareholder Committee.[3]  Shareholder involvement in the Mediation represents the best opportunity for a meaningful dialogue with the Debtors and other Mediation Parties so that constituents may understand what happened to their investments and determine whether continued prosecution of the Objection is warranted.[4]

 

For the benefit of all involved, we respectfully request that Your Honor grant the Ad Hoc Shareholder Committee status as a Mediation Party and allow it to participate fully in the Mediation.  The Ad Hoc Shareholder Committee has read the Mediation Order and is ready and able to abide by all of its terms, including the confidentiality provisions set forth therein.

 

Very truly yours,

Ancela R. Nastasi

 

cc:        Judge Stuart M. Bernstein

[Skadden]

[Weil]

[BOKF]

[Client]

[1] See Preliminary Objection of Ad Hoc Shareholder Committee to Debtors’ Motion for Entry of an Order (A) Approving the Adequacy of the Debtors’ Disclosure Statement; (B) Approving Solicitation and Notice Procedures with Respect to Confirmation of the Debtors’ Joint Proposed Plan; (C) Approving the Form of Various Ballots and Notices in Connection Therewith; and (D) Scheduling Certain Dates With Respect Thereto [Docket No. ______] (the “Objection”).
[2] Unless otherwise defined, capitalized terms have the meaning ascribed to them in the Mediation Order.
[3] It appears to us that the Mediation Order authorizes Your Honor to join any appropriate parties, such as the Ad Hoc Shareholder Committee, to the Mediation. Paragraph 9 of the Mediation Order gives Your Honor the right to “conduct the Mediation as . . . she sees fit, establish rules of the Mediation, and consider and take appropriate action with respect to any matters the Mediator deems appropriate in order to conduct the Mediation, subject to the terms of this Order.”  (Mediation Order, ¶ 9).  In light of the importance of ensuring that all proper parties-in-interest are included in any Plan mediation, other Courts have implemented Plan mediation procedures to either expressly include mechanisms for the allowance of any party-in-interest to participate,  see, e.g., Order (A) Scheduling Certain Hearing Dates and Deadlines, (B) Establishing Certain Protocols in Connection With the Approval of Debtors’ Disclosure Statement, and (C) Establishing the Terms Governing Mediation (In re Energy Future Holdings Corp., Case No. 14-10979 (CSS) (Bankr. Del. 2014) (Docket No. 4497)), or to leave the decision of mediation participants entirely to the mediator, see, e.g., Order Assigning Matter to Mediator (In re Paragon Offshore PLC, et al., Case No. 16-10386 (CSS) (Bankr. Del.  2016) (Docket No. 1140).  Paragraph 9 of the Mediation Order places this Mediation squarely in the latter category.
[4] Adding the Ad Hoc Shareholder Committee to the Mediation is not only sensible under the circumstances, we believe it also is consistent with the mandates of Bankruptcy Code section 1109(b), providing that a “party in interest, including . . . an equity security holder  . . ., may raise and may appear and be heard on any issue in a case under this chapter.”  11 U.S.C. § 1109(b) (emphasis supplied).  Section 1109(b) codifies the “’broad concept of the absolute right to be heard in order to insure fair representation in the case and prevent excessive control by insider groups,’” giving the right to “appear and be heard to parties other than creditors’ committees.”  Matter of Marin Motor Oil, Inc., 689 F.2d 445, 456 (3d Cir. 1982) (internal citations omitted), cited with approval in In re Caldor, 303 F.3d 161, 169 (2d Cir. 2002).

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