## Facts

- Chemtura Corporation and affiliates filed Chapter 11 to restructure substantial funded debt and legacy liabilities, including environmental and pension obligations.
- The debtors proposed a plan supported by the debtors, the unsecured creditors’ committee, an ad hoc bondholders’ committee, and pension-related stakeholders.
- The plan used an enterprise value of approximately $2.05 billion (the midpoint of a $1.9–$2.2 billion range) derived from the debtors’ advisor’s DCF, comparable-company, and precedent-transaction analyses.
- The plan’s value allocation provided recoveries to creditor classes but left existing equity holders with no meaningful recovery on the ground that equity was “out of the money.”
- The official equity committee objected, offering a higher enterprise value range (approximately $2.2–$2.7 billion) based primarily on its advisor’s DCF analysis, supported only secondarily by market multiples and transactions.
- The equity committee attempted to market the company or attract investment using its valuation assumptions, but those efforts did not produce binding offers at the suggested levels.
- The plan also incorporated a global settlement resolving disputed claim-treatment issues among major creditor and pension constituencies, including contested bond-related rights and pension matters.

## Issues

1. Whether the plan satisfied the “fair and equitable” requirement under 11 U.S.C. § 1129(b), including the absolute priority rule, given competing expert valuations and the proposed elimination of equity recoveries.
2. Whether the plan-embedded global settlement met the applicable standard for approval of settlements under Bankruptcy Rule 9019 (including the Second Circuit’s “range of reasonableness” analysis).
3. Whether the plan met other confirmation requirements, including good faith under § 1129(a)(3), and whether plan releases/exculpations and dissolution of the equity committee were permissible.

## Decision

- The court accepted the debtors’ enterprise value range and the plan’s $2.05 billion midpoint and rejected the equity committee’s higher valuation.
- The court held that, at the accepted valuation, creditor claims exhausted enterprise value and equity had no residual interest; the plan therefore was “fair and equitable” under § 1129(b) and complied with absolute priority.
- The court approved the plan-embedded global settlement as reasonable and appropriate under the Rule 9019 standard.
- The court overruled remaining objections, found the plan proposed in good faith, sustained the plan’s release/exculpation structure as permitted, confirmed the plan, and authorized dissolution of the equity committee following confirmation.

## Legal Principles

- Chapter 11 confirmation under § 1129(b) requires a plan to be “fair and equitable” to dissenting classes; equity may receive nothing if enterprise value is fully consumed by senior claims (absolute priority).
- A bankruptcy court may choose among competing valuation opinions by weighing methodology, assumptions, credibility, and corroborating market evidence; failed market checks can undermine aggressive valuation conclusions.
- A plan may include a comprehensive settlement if it falls within the “range of reasonableness” after considering litigation risks, expected outcomes, cost and delay of continued disputes, and support from informed stakeholder constituencies (Rule 9019/Second Circuit framework).
- A plan negotiated at arm’s length among sophisticated parties and grounded in a reasonable valuation and settlement can satisfy § 1129(a)(3) good-faith requirements.
- Plan releases and exculpations may be approved when appropriately limited and supported by the contributions and roles of the released parties in achieving reorganization.
- An official equity committee may be dissolved after confirmation where the court finds equity has no economic stake under the confirmed plan.

## Conclusion

The bankruptcy court confirmed Chemtura’s reorganization plan by crediting the debtors’ valuation and market evidence, approving a broad plan-embedded settlement as reasonable, and holding that equity was properly excluded from distributions because enterprise value was exhausted by creditor claims under § 1129(b).


In re Chemtura Corp., 439 B.R. 561 (Bankr. S.D.N.Y. 2010)