## Facts

- In October 2004, three related entities—Housing Development Associates, S.E. (HDA), El Comandante Capital Corporation (ECCC), and El Comandante Management Company, LLC (ECMC)—filed Chapter 11 petitions and proceeded as debtors in possession in jointly administered cases.
- Venue was transferred from the U.S. Bankruptcy Court for the District of Delaware to the U.S. Bankruptcy Court for the District of Puerto Rico.
- After the petitions were filed, Caribbean Thoroughbred Racing Company, Inc. (Caribbean) purchased a claim against ECMC, becoming a creditor of ECMC (but not of HDA or ECCC).
- Caribbean negotiated to purchase substantially all assets of the debtor group and, in 2006, filed a joint plan of reorganization and a disclosure statement covering ECMC, HDA, and ECCC.
- The proposed transaction contemplated a purchase price in the range of roughly $60 million, with a large portion earmarked for the debtors’ bondholders, and with Caribbean funding payment of administrative expenses (including tax-related administrative claims) and a distribution to unsecured creditors.
- Caribbean filed an initial disclosure statement, then amended it after objections and hearings; it ultimately filed a Second Amended Disclosure Statement and a Second Amended Joint Plan shortly before the hearing set for disclosure-statement approval.
- Objections were filed by parties including the indenture trustee for the bondholders and governmental entities, challenging whether the disclosure statement provided enough information for voting and raising concerns about Caribbean’s ability to propose a plan affecting HDA and ECCC even though Caribbean was not their creditor.
- The court considered approval of the Second Amended Disclosure Statement under 11 U.S.C. § 1125 and related rules, and addressed whether Caribbean qualified as a “party in interest” for plan-filing purposes in these jointly administered cases.

## Issues

1. Whether Caribbean’s Second Amended Disclosure Statement contained “adequate information” within the meaning of 11 U.S.C. § 1125 to permit solicitation and voting on the proposed joint Chapter 11 plan.
2. Whether Caribbean—having purchased only an ECMC claim but acting as the proposed buyer and plan proponent for all three estates—could qualify as a “party in interest” entitled to propose a joint plan under 11 U.S.C. §§ 1109(b) and 1121(c).

## Decision

- The court approved Caribbean’s Second Amended Disclosure Statement, finding it contained adequate information under 11 U.S.C. § 1125.
- The court found that creditors and other parties had a meaningful opportunity to review and object, even though the second amended disclosure statement was filed shortly before the hearing.
- In addressing the plan-proponent objection, the court treated “party in interest” as a functional and nonexclusive category and accepted that Caribbean’s economic stake as purchaser and funder of plan payments supported its status as a party in interest for proposing a joint plan in the jointly administered cases.

## Legal Principles

- A Chapter 11 disclosure statement may be approved only if it provides “adequate information” as defined by 11 U.S.C. § 1125(a)(1): information sufficient to allow a hypothetical reasonable investor typical of holders of claims or interests to make an informed judgment about the plan.
- At the disclosure-statement stage, the court’s focus is whether the disclosures are sufficient for voting; disputes that mainly turn on confirmation requirements are generally addressed at confirmation rather than used to block approval where the disclosure is adequate.
- “Party in interest” under 11 U.S.C. § 1109(b) is not limited to the statute’s listed examples; the term can include entities with a direct financial interest in the Chapter 11 outcome.
- For plan-filing eligibility under 11 U.S.C. § 1121(c), an entity may qualify as a party in interest where it has a concrete economic stake in a proposed reorganization transaction, including where the entity is the contemplated buyer of the debtor group’s assets and the source of plan funding.
- In jointly administered cases proposing a joint plan, a plan proponent’s relationship to the overall transaction and its effect across the estates can support party-in-interest status even if the proponent is not a creditor of every debtor.

## Conclusion

In In re El Comandante Management Co., LLC, the bankruptcy court approved Caribbean’s Second Amended Disclosure Statement because it provided adequate information for solicitation under § 1125, and it treated Caribbean’s role as purchaser and plan funder—combined with its creditor status in ECMC—as sufficient to qualify it as a party in interest eligible to propose a joint plan in the jointly administered Chapter 11 cases.


In re El Comandante Management Co., LLC, 359 B.R. 410 (2006)