In Re Bermec Corp.

Bermec Corporation (Bermec) (debtor) filed a Chapter 11 petition on March 29, 1971, followed by an amended Chapter 11 petition on April 16, 1971, but did not file a reorganization plan on either date. Pacar Financial Corp., White Motor Corp., International Harvester Credit Corp., and Ford Motor Creditor Corp. (collectively, the creditors) (creditors) opposed Bermec’s Chapter 11 petition based on Bermec’s lack of a reorganization plan addressing full repayment. The creditors alleged that, absent such a plan, Bermec could not show a reasonable likelihood of reorganization success and had not acted in good faith. The creditors viewed the failure to submit such a plan as indicative of an unreasonably low likelihood of reorganization success. Nonexistence of such a plan at the time that Bermec filed the petition, the creditors claimed, would harm their interests as secured creditors, as it would leave them unable to enforce liens over collateral quickly depreciating in value. The district court appointed Referee in Bankruptcy Herzog as special master to determine measures that would provide a reasonable chance of reorganization success. These steps included favorable renegotiation of unprofitable contracts, increases in seasonal revenue, sales of extra equipment, escalation clauses to save revenue, measures to control fuel, and expected profitable business. Based on Herzog’s report, the district court issued an order approving Bermec’s petition, and the creditors appealed.