Milbank, Tweed, Hadley & McCloy LLP recently secured confirmation of its client JD Holdings’ creditor-proposed chapter 11 bankruptcy plan of reorganization for over 70 debtors affiliated with John Q. Hammons Hotels and Resorts. JD Holdings was the largest creditor in the $1.2 billion bankruptcy case, and as a result of the confirmation of its plan—which occurred just four months after the termination of exclusivity—JD Holdings will obtain substantially all of the debtors’ assets, including 35 hotels in 16 states, and dozens of other assets. The reorganization plan brings to a close six years of litigation in which Milbank pursued JD Holdings’ claims, first in the Delaware Court of Chancery and then in the US Bankruptcy Court for the District of Kansas, after Hammons filed for bankruptcy on the eve of the Delaware trial to avoid a judgment in JD Holdings’ favor.
These bankruptcy cases revolve around a right of first refusal provided by the Hammons organization to JD Holdings. After Hammons and his affiliates breached the agreement, JD Holdings brought an action in the Delaware Court of Chancery that sought to require the defendants to sell to JD Holdings the assets that were subject to that agreement, including a portfolio of 35 hotels and other assets, at a price to be determined at trial. Just weeks before the July 2016 start of the trial, however, Hammons filed for bankruptcy and the Delaware litigation was stayed.
In early 2018, after JD Holdings defeated the debtors’ proposed plan of reorganization and successfully terminated the debtors’ exclusivity period, JD Holdings and the debtors engaged in mediation. As a result of that mediation, JD Holdings and the debtors reached a global settlement that called for debtors to support JD Holdings’ plan of reorganization, which called for among other things, JD Holdings to acquire debtors’ assets, including the 35 hotels. Additionally, JD Holdings’ claim for breach of its right of first refusal was set at $496 million.
On May 11, 2018, the Bankruptcy Court confirmed JD Holdings’ plans of reorganization just four months after the termination of the debtors’ period of exclusivity. Within one week of confirmation, the plans went effective and were substantially consummated when title to 27 hotels was transferred from the debtors to JD Holdings. Under the terms of the plans, the debtors will transfer their remaining assets, including eight additional hotels, to JD Holdings within 120 days from the date of the confirmation order, or September 8, 2018.
The Milbank team was led by partners Scott A. Edelman (Litigation), Mark Shinderman (Financial Restructuring), Jed Schwartz (Litigation), and Alan Stone (Litigation), with support from associates Kate Rhodes Janofsky, Daniel White, Andrew Porter, Courtney Brown, James Behrens, and Jordan Weber.