Earlier this year, Orrick’s Restructuring team began a three-part look at the American Bankruptcy Institute’s Chapter 11 Reform Report. In part one we looked at issues related to confirmation, valuation, financing and asset sales. Last month, in part two, we focused on modifications to the Bankruptcy Code’s “safe harbors” for derivatives and other complex financial transactions. This final part focuses on a variety of critical issues: third party releases, rejection of collective bargaining agreements, professional compensation issues and treatment of executory contracts in bankruptcy.

In This Issue:

- Third-Party Releases

- Formalizing Process Around Rejection of Collective Bargaining Agreements

- Executory Contracts Under Section 365 of the Bankruptcy Code

- Professional Compensation

- Excerpt from Professional Compensation:

Current Law -

Pursuant to section 327 of the Bankruptcy Code, a debtor must seek court approval to retain “disinterested” professionals to assist with its chapter 11 case. The fees of these retained professionals are subject to court approval after a determination of “reasonableness” under section 330 of the Bankruptcy Code. Upon a determination that, among other things, the fees were (i) reasonable, necessary or beneficial to the estate (11 U.S.C. § 330(a)(3)(C)), and (ii) the amount of time spent was commensurate with the complexity, nature and importance of the issue or task (11 U.S.C. § 330(a)(3)(D)), a court will usually approve payment of such fees out of estate funds...