Analysis Group Client Calpine Achieves Rarely Granted "Substantive Consolidation" in Bankruptcy Case.BOSTON -- In a decision that will allow Analysis Group client Calpine Corp. to avoid a protracted pro·tract tr.v. pro·tract·ed, pro·tract·ing, pro·tracts 1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations. 2. battle over a massive restructuring plan, the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Bankruptcy Court bankruptcy court n. the specialized Federal court in which bankruptcy matters under the Federal Bankruptcy Act are conducted. There are several bankruptcy courts in each state, and each one's territory covers several counties. for the Southern District of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of has ruled that the electricity wholesaler may substantively consolidate the debt obligations of its myriad entities. The ruling, which was covered widely in major news outlets, came after Analysis Group academic affiliate Jerry Arnold, Professor of Accounting at the University of Southern California The U.S. News & World Report ranked USC 27th among all universities in the United States in its 2008 ranking of "America's Best Colleges", also designating it as one of the "most selective universities" for admitting 8,634 of the almost 34,000 who applied for freshman admission , showed that substantive consolidation would not disadvantage any of the company's creditors. Substantive consolidation is the pooling of the assets and liabilities of separate legal entities for the purpose of calculating creditor distribution; it is rarely permitted in bankruptcy proceedings bankruptcy proceedings n. the bankruptcy procedure is: a) filing a petition (voluntary or involuntary) to declare a debtor person or business bankrupt, or, under Chapter 11 or 13, to allow reorganization or refinancing under a plan to meet the debts of the party . In this matter, Calpine (the petitioner) bore the burden of proving that the multi-pronged tests to support substantive consolidation were met. "Calpine had 274 bankrupt legal entities to sort out, making it one of the most complicated cases I've worked on in more than 30 years of forensic accounting Forensic accounting, sometimes called investigative accounting, involves the application of accounting concepts and techniques to legal problems. Forensic accountants investigate and document financial Fraud and white-collar crimes . Support from Analysis Group was outstanding. Their accuracy and thoroughness enabled us meet the Court's multi-pronged tests to support a substantive consolidation ruling." -- Jerry L. Arnold, Expert Witness Managing Principal Jonathan Arnold led an Analysis Group team including Vice Presidents Elizabeth A. Evans and Suzanne E. Heinemann in support of Professor Arnold in an examination of the documents filed by Calpine's bankrupt legal entities. Professor Arnold reviewed more than 1.2 million line items related to Calpine's inter-company transactions in order to determine whether the various entities' accounts were entangled en·tan·gle tr.v. en·tan·gled, en·tan·gling, en·tan·gles 1. To twist together or entwine into a confusing mass; snarl. 2. To complicate; confuse. 3. To involve in or as if in a tangle. and, if so, whether they could be separated in a cost-effective and timely manner. Professor Arnold then submitted a report to the Court in support of Calpine's Sixth Amended Joint Plan of Reorganization demonstrating that Calpine met the requirements for substantive consolidation as a matter of accounting. In approving Calpine's reorganization plan A scheme authorized by federal law and promulgated by the president whereby he or she alters the structure of federal agencies to promote government efficiency and economy through a transfer, consolidation, coordination, authorization, or abolition of functions. , Judge Burton R. Lifland stated that Professor Arnold's report "without contradiction, fully support[ed] findings...that...requirements [for substantive consolidation] have been met in this case." The Court's approval of the plan enabled Calpine to keep $7.6 billion in exit financing in what the company's General Counsel Gregory L. Doody characterized as "the largest and most complex reorganization conducted under the new bankruptcy laws." Calpine's legal team was led by Kirkland & Ellis partners Richard M. Cieri, Marc Kieselstein, Mark E. McKane, and Jeffrey S. Powell. Analysis Group, Inc. (www.analysisgroup.com) provides economic, financial, and business strategy consulting to leading law firms, corporations, and government agencies. The firm has more than 400 professionals, with offices in Boston, Chicago, Dallas, Denver, Los Angeles, Menlo Park, New York, San Francisco, Washington, and Montreal. |
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