In re CDECO Maritime Construction Inc., Roger J. Au & Son, Inc., and Firelands Sewer & Water Construction Co., Inc.

Summary

The United States Bankruptcy Court for the Northern District of Ohio evaluates the adequacy of a creditor-sponsored disclosure statement accompanying a liquidating Chapter 11 plan for three debtor corporations. The court concludes that the proposed disclosure statement is generally adequate under 11 U.S.C. § 1125 but requires additional disclosures concerning administrative and government claims, mathematical corrections, litigation-related assets and claims, and the effective date of a supplemental agreement.

Holdings

1. A disclosure statement is adequate when, considering the nature and history of the debtor, the condition of its books and records, and the relevant creditor body, it provides information sufficient for a hypothetical reasonable investor to make an informed judgment about the plan. The determination is case-specific and flexible.
2. A disclosure statement need not argue the parties' theories of recovery, validate those theories, or speculate about the possible consequences of pending litigation, but it must disclose enough about material litigation and proposed treatment of litigation-related claims to permit an informed evaluation of the plan.
3. The disclosure statement could be approved for distribution only after addressing the disputed administrative expense, the post-petition Army Corps of Engineers claim, mathematical errors, the rationale for treatment of the Euthenics claim, the nature and status of the Aetna litigation and potential recovery, and the federal court's finding regarding the supplemental agreement's effective date.

Questions Presented

1. Whether Aetna's proposed disclosure statement contained adequate information under 11 U.S.C. § 1125 to permit creditors and equity security holders to make an informed judgment about the liquidating plan.
2. Whether the disclosure statement sufficiently disclosed the treatment of administrative expenses, the post-petition Army Corps of Engineers claim, contract-claim calculations, the Euthenics claim, litigation against Aetna, and the effective date of the supplemental agreement.
3. Whether the disclosure statement was required to provide detailed theories of recovery or speculate about possible outcomes of pending litigation.

Disposition

approved