Bankrupt Paddock Enterprises LLC shouldn’t be allowed to employ two law firms, a restructuring consultant, and a chief restructuring officer until an independent examiner can first review the propriety of pre-bankruptcy asset transfers, the U.S. Trustee said.
Law firms Latham & Watkins LLP and Richards, Layton & Finger LLP, and consultant Alvarez & Marsal North America LLC, were all involved in Paddock’s December 2019 “corporate restructuring” under Delaware law, the Justice Department’s bankruptcy watchdog said March 6.
David J. Gordon, whom Paddock wants to name as president and chief restructuring officer, also was involved, according to filings with the U.S. Bankruptcy Court for the District of Delaware.
To be employed by a bankruptcy estate, professionals must be “disinterested,” meaning they aren’t creditors, equity holders, or have interests adverse to the company, the trustee said.
An examiner must investigate whether the professionals’ representation during the pre-bankruptcy restructuring creates any “inherent and structural” conflicts or inter-company claims, it said.
Paddock filed Chapter 11 Jan. 6 to create a plan to contend with asbestos-related injury and illness claims stemming from the production of products by Owens-Illinois Inc. during the mid-20th century, the trustee said.
Prior to the filing, the company underwent a restructuring in order to separate asbestos liabilities from its continuing operations.
O-I Glass Inc. was created to maintain operations of the world’s largest glass bottle manufacturer, the trustee said. Paddock, a unit of O-I Glass, was formed to address legacy asbestos-related injury liabilities.
The trustee filed a motion Feb. 24 asking the court to appoint an examiner to investigate the pre-bankruptcy transactions.
Last week, the trustee objected for similar reasons to the company’s choice of a future claims representative, whose job is to represent the interests of asbestos injury claimants who are currently unknown because the injuries haven’t yet manifested.
The case is In re Paddock Enterprises, LLC, Bankr. D. Del., No. 20-10028, United States Trustee’s Objection to Retention of Latham & Watkins LLP 3/6/20.