In Re Crowthers McCall Pattern, Inc.

Sewing pattern manufacturer Crowthers McCall Pattern, Inc. (McCall) (debtor) filed for reorganization under Chapter 11. Although the market for patterns had declined somewhat, McCall had a 35.7 percent market share and only two competitors. McCall continued the business as debtor-in-possession and marketed it as a going concern for two years. The business was heavily shopped, and a bidder agreed to acquire the business for $45 million and continue it as “The McCall Pattern Company” if the court confirmed the plan. The disclosure statement estimated that in a hypothetical liquidation McCall would realize $35.5 million. An analyst valued each asset separately relying on standard market assumptions such as low percentages of wholesale recoverable for inventory and difficulty recovering receivables in liquidation, but also factored in bids McCall received, its market share and competition, and its name recognition. An accountant with liquidation expertise testified that orderly liquidations usually brought only 25 to 75 percent of wholesale values. A common stockholder nonetheless opposed the plan, arguing that the plan was not fair and equitable because creditors and shareholders would receive more in liquidation, the liquidation analysis lacked adequate appraisal information, and McCall should have solicited actual liquidation bids.