In re Orfa Corp. of Philadelphia

Orfa Corporation of Philadelphia and two related entities (collectively, Orfa) (defendants) possessed valuable licenses to exploit waste-management technology but entered into bankruptcy proceedings before fully constructing a plant or seeing any profit. EAFC and another creditor of Orfa (collectively, the Proponents) (defendants), both of which were experienced investment brokers, proposed a reorganization plan. Under the plan, Orfa would seek bank financing; if unsuccessful, the Proponents would commence a private placement of preferred stock in Orfa in order to raise the necessary funds to pay off debt and operate the reorganized entity. The amount required for Orfa’s future operations was in the millions of dollars. The reorganized company would be run by a new, much more experienced management team who expressed measured optimism about the venture’s prospects. The Proponents’ plan was objected to by SPNB (plaintiff), which submitted proofs of secured and unsecured claims amounting to $8,072,065.76. Prior to the bankruptcy, SPNB had advanced more than $14 million to Orfa for construction of its plant and had never questioned the viability of Orfa’s technology. The Proponents’ plan was also objected to by unsecured creditor BEC (plaintiff) and licensors of technology to Orfa (plaintiffs). SPNB, BEC, and the licensors argued to the bankruptcy court that the plan was not confirmable because it was not feasible.