Publications

On September 8, 2017, Judge Gregory Taddonio, of the United States Bankruptcy Court for the Western District of Pennsylvania, confirmed the rue21, inc. debtors’ Chapter 11 plan of reorganization, which included a full release of Apax Partners, rue21’s equity sponsor. The Court’s decision overruled objections by the unsecured creditors committee (the “UCC”) to the release of the company’s claims against Apax Partners related to their role as equity sponsor in the company’s 2013 take-private transaction. The UCC claimed that as part of the transaction, Apax and certain affiliates may have received constructive fraudulent transfers and that Apax had not contributed sufficient value to the restructuring to justify the release under the Master Mortgage factors described below. rue21 and Apax contended that the potential claims against Apax were meritless– rue21’s independent directors had commissioned an independent investigation led by independent counsel which supported this conclusion– and that the release of Apax was justified and in the best interest of the estates. Judge Taddonio heard arguments at the August 23 Confirmation Hearing regarding these potential claims and the 2013 take-private transaction by Apax and issued an opinion confirming the Chapter 11 plan as submitted, including the Apax release. The Court held that the analysis to approve the release must go beyond a simple business judgment rule standard for the debtors. The decision instead was an augmented application of Master Mortgage factors tailored to the facts of the case including, critically, an analysis of the colorability of the potential claims.