Disclosure Statement for Plan of Reorganization

Disclosure Statement for Plan of Reorganization

Drafts a § 1125-compliant disclosure statement providing "adequate information" to enable a hypothetical reasonable investor of each class to make an informed judgment about the proposed plan.

Prerequisites

1. Case details — debtor name, case number, court, filing date
2. Plan of Reorganization — final or near-final draft
3. Financial records — P&L, balance sheets, cash flow (min. 3 years)
4. Schedules and SOFA — filed schedules of assets/liabilities, statement of financial affairs
5. Asset appraisals — valuations for significant estate property
6. Exit financing — term sheets, LOIs, or DIP financing terms
7. Claims register or bar date order — for creditor classification
8. Executory contracts/leases — with assume/reject decisions

Quick Start

1. Gather all prerequisites; confirm Plan draft is near-final
2. Draft sections 1–8 below, cross-checking every figure against the Plan
3. Run the guidelines checklist before finalizing
4. Submit to court for approval under § 1125 — do not solicit votes until approval order is entered

Output Structure

1. Introduction

• Debtor, case number, court, petition date
• State § 1125 "adequate information" standard
• Section roadmap and cross-reference to Plan

2. Debtor Background

3. Class Treatment Summary

Flag which classes are deemed to accept (unimpaired) or reject (receive nothing) and do not vote.

4. Financial Projections and Feasibility

• Historical: 3-year P&L, balance sheet, cash flow
• Projections: 3–5 years — revenues, expenses, EBITDA, debt service
• Assumptions: State explicitly (growth rate, cost savings, headcount, CapEx)
• Liquidation analysis: Side-by-side Plan recovery vs. Chapter 7 proceeds per class (required)
• Feasibility: Address § 1129(a)(11) — plan not likely followed by further liquidation or reorganization

5. Risk Factors

• Confirmation: Feasibility challenges, fair-and-equitable objections, cramdown disputes
• Operational: Customer concentration, regulatory exposure, key-person dependency
• Legal: Pending litigation, preference/fraudulent transfer exposure, disputed claims
• Funding: Exit financing contingencies, asset sale completion, DIP maturity

6. Implementation and Funding

• Sources: Cash on hand, operations, asset sales, new equity, exit facility, litigation recoveries
• Exit financing details: Lender, amount, conditions precedent, status
• Distribution timeline: Effective date trigger, initial distribution, periodic schedule
• Executory contracts: Table of assumed, assigned, and rejected — with rejection damage treatment
• Restructuring steps: Entity mergers, asset transfers, new governance

7. Voting and Confirmation

• Voting deadline: [DATE]
• Ballot submission: Method, address, instructions
• Confirmation standards (§ 1129): at least one impaired accepting class (excluding insiders); feasibility; good faith; fair and equitable to non-consenting classes
• Hearing: Date, time, courtroom
• Objection deadline: [DATE — typically 7 days before hearing per local rules]
• Effect: Discharge of pre-petition debts; binding on all parties

8. Conclusion

• Recommendation to vote in favor
• Why Plan is superior to liquidation or competing plan
• Counsel contact information
• Forward-looking statement disclaimer

Guidelines

• Plan consistency: Every treatment, amount, and timing must match the Plan exactly — discrepancies are grounds for disapproval
• Plain language: Class treatments must be readable by lay creditors; define all terms on first use
• Bluebook citations: All statutory, rule, and case citations in proper format
• Source attribution: Pinpoint-cite factual assertions to case record documents
• Liquidation analysis: Must be prepared by a qualified financial advisor or state methodology — flag for client's financial professional
• Local rules: Verify voting procedures, notice requirements, and objection deadlines against applicable district rules [VERIFY per district]
• Projections disclaimer: Include forward-looking statement disclaimer per USTP guidelines
• § 1125(d): Court must approve disclosure statement before vote solicitation — never solicit before approval order entry