Emerging Trends and Lingering Criticisms: A CRO Retention Update

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Since the use of chief restructuring officers (CROs) in chapter 11 cases first became prevalent in the 1990s, the process of retaining a CRO has revolved, and while § 327(a) of the Bankruptcy Code had long been the traditional statutory basis for CRO retention, it had never been used exclusively. In his October 2011 Journal article, Kevin M. Baum (Katten Muchin Rosenman LLP; Rockville Centre, N.Y.) described four alternative statutory bases for retaining a CRO: §§ 327(a), 327(b), 363(b)(1) and 363(c)(1). In the last several years, however, a trend appears to have emerged under which most CRO retention applications are made pursuant to §§ 105(a) and 363(b)(1), rather than § 327(a) or (b), or § 363(c)(1).

This article will first discuss the basics of CRO retention pursuant to §§ 105 (a) and 363(b)(1), and describe the expansion of this approach from the Southern District of New York to jurisdictions throughout the country. Next, this article will describe the advantages that CRO retention pursuant to §§ 105(a) and 363(b)(1) offers compared with § 327(a). Finally, this article will discuss specific concerns with CRO retention pursuant to §§ 105(a) and 363(b) (1) that have been raised in certain juris¬dictions, and identify steps that debtors can take to increase the likelihood of successfully retaining a CRO pursuant to §§ 105(a) and 363(b)(1).

Originally published in the ABI Journal, Vol. XXXII, No. 8, September 2013.

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Topics:  Chapter 11, Chief Restructuring Officers, Commercial Bankruptcy

Published In: Bankruptcy Updates, General Business Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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