Dore Law - June 2019

Dore Law - June 2019

THE D or É R eport

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JUNE 2019

THE RETURN OF CHAPTER 22 BANKRUPTCY

We have all heard of Chapter 7 and Chapter 11 bankruptcy. Chapter 7 is generally used when a company throws the keys on the table, liquidates its assets, and distributes proceeds to creditors in the order set out in the Bankruptcy Code. Chapter 11 is generally used when a company is trying to reorganize and maintain itself as an entity with a going concern after a bankruptcy plan of reorganization is voted on and confirmed. These “chapters” are named that way because they are literally the seventh and eleventh chapters in the bankruptcy code. There are also some lesser-known chapters — Chapter 9 for municipalities, Chapter 12 for a family farmer or fisherman, and Chapter 15 for cross-border insolvencies. On Feb. 1, 2017, Vanguard Natural Resources, LLC (based in Houston) filed Chapter 11 bankruptcy. It sold its noncore assets and filed a plan of reorganization, which was ultimately confirmed on July 18, 2017. On Jan. 29, 2019 (the eve of the two- year statute of limitations from the Feb. 1 filing date), Vanguard sued more than 250 entities who received allegedly preferential transfers in the 90-day preference period. On March 31, 2019, only two months later, Vanguard did the unthinkable — it filed another Chapter 11. Bankruptcy professionals have deemed this second filing Chapter 22. There is no Chapter 22 of the bankruptcy code; it is merely But have you ever heard of Chapter 22?

a euphemism developed from the idea that one Chapter 11 plus another Chapter 11 equals a Chapter 22. Funny, right? Vanguard’s creditors didn’t think so. Believe it or not, there is no time limit a company must wait before filing another Chapter 11. Individual debtors have to wait a specific number of years before they are allowed to file again to avoid serial filing, but that rule is not applicable to Chapter 11.

to see it in the oil and gas sector. There are several other recently reorganized oil and gas companies who we believe are at risk of following in Vanguard’s footsteps. As professionals who often find ourselves in the creditor position in these cases, we must become more diligent than ever when reviewing the strength of a company exiting Chapter 11. Do they have cash? Do they have producing assets or jobs lined up? Do you need to tighten credit terms? Do you really want to extend favorable credit terms in exchange for critical vendor status or other elevated treatment in the first Chapter 11? Do you need to demand prepayments to eliminate the risk of preference exposure? Nothing would be more difficult than explaining to your CFO why you are getting hit with a second preference lawsuit when you haven’t even settled the first Chapter 11’s preference lawsuit. In the end, the best thing you can do is check your lien rights, check your preference exposure, and hire an experienced bankruptcy attorney. After all, as the Houston bankruptcy judge put it on the first day of the second Vanguard case, one of the main goals of Chapter 22 is to avoid Chapter 33.

“There is no Chapter 22 of the bankruptcy code; it is merely a euphemism developed from the idea that one Chapter 11 plus another Chapter 11 equals a Chapter 22.”

There is an eight-year time limit to obtain a second discharge only if that company sold all of their assets in the first Chapter 11, which didn’t apply to Vanguard. In 2014, an NYU professor named Edward I. Altman published a study called “Revisiting the Recidivism - Chapter 22 Phenomenon in the U.S. Bankruptcy System,” which found that approximately 15 percent of all debtors who emerge as continuing entities from reorganization under Chapter 11 bankruptcy eventually file for bankruptcy protection again.

-Zachary McKay

So while this phenomenon has been around for decades, we are only now beginning

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THE POWER OF ‘MINDSET’

How Being Open to Growth Leads to Success

For decades, Dr. Carol S. Dweck studied the

practice and perseverance. Those who approach life’s hurdles as an opportunity for growth are the ones who find long-term success.

phenomenon of success. How is it that some people are able to grow their business, stay fit, or achieve their personal goals while others in similar situations stall out? “Mindset” is Dr. Dweck’s answer to this question. Subtitled “The New Psychology of Success,” this book chronicles the Stanford psychologist’s findings, which suggest an inseparable link between belief and achievement.

If you’ve ever said, “I’m just not good at math,” or “I’m not a natural leader,” you’ve fallen into the fixed mindset trap. If you believe there’s nothing you can do to change your circumstances, you’ll never strive to improve them. The same is true of positive fixed opinions of yourself. Dr. Dweck points out that those who believe themselves to be “a great boss” or “an amazing athlete” are also doing themselves a disservice. Once you think your skills are tied to who you are as a person, you’ll avoid challenging them for fear they might be found wanting. This leads your talents to atrophy as you seek detours rather than facing challenges head-on. to recognize that the path to success lies in open-minded perseverance. “A person’s true potential is unknown (and unknowable),” she says. “It’s impossible to foresee what can be accomplished with years of passion, toil, and training.” Not only does “Mindset” drive this point home with well-documented experiments and studies, but it also provides a workshop to help people break free of their fixed mindset and find success. Dr. Dweck argues that, instead of falling victim to the pessimism and self-delusion that defines fixed mindset thinking, we need

According to Dr. Dweck, people tend to think about the challenges in front of them in one of two ways. They either have a “fixed” mindset — believing that their talents and abilities are static, intrinsic properties of who they are, or a “growth” mindset — believing they can improve every aspect of themselves with

TRENDS & TRAPS IN 2019 A Look Backward … and Forward!

Special thanks are in order for the 100-plus legal and financial professionals and 18 speakers who made “TRENDS & TRAPS 2019: A Credit & Collection Symposium for the Oil & Gas Services & Equipment Industries,” a massive success! Conway MacKenzie, PESA, and NACM Southwest partnered with the Doré Law Group to host this first annual event on April 17 in Houston last month! We incorporated a day chock full of informative topics with panels of General Counsels and Credit Managers, all representing leading companies, who offered

their insights and experiences for the attendees’ benefit. In addition to legal advice on bankruptcies, MSAs, and many form agreements used in the industry, there were presentations on the economics of shale and the benefits of serving on a creditor committee. The demonstration of the latest AI technology in the world of credit was especially eye-opening. Plans are already being made for a bigger and better Trends & Traps 2020, including more industries and more superstar speakers. We hope to see you at next year’s event!

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LEGAL ‘SPIN’ Doré Embraces the Sport of Cycling! At Doré Law Group, we certainly take pride in our work at the office, but we also strive to do some good outside of work. One way our team stays involved in community service and charity work is through the sport of cycling. The firm’s founder, Carl Doré, Jr., has been biking for years. He and his wife, Tamra, ride with Team HOTT (Houston On Tandems Together). In case you don’t know, a tandem cycle is designed to be ridden by more than one person. In other words, two people on one bike ride long distances together who somehow both come out alive on the other end. Just last month, Carl and Tamra began riding their new, custom tandem bike with the group around the state of Arkansas. Joining in with Carl and Tamra and their love of cycling ventures is Zach McKay, the attorney shareholder in charge of our litigation and bankruptcy sections. Zach just completed his second MS 150, which is a grueling two-day ride from Houston to Austin that takes place at the end of April. This ride also serves as a vehicle to raise awareness and funds for Multiple Sclerosis (MS) research and treatment. Zach and over 10,000 other riders made this the largest fundraising bike series in the world. Elizabeth Hall, a senior paralegal, rides with the North West Cycle Club and has worked her way to metric century events (62 miles), including the Katy Flatland Century. Between her runs for charity

and biking, Elizabeth is hard to slow down.

Our firm is also a supporter of Bike to the Beach: A Texas Ride for Autism & Disabilities. Three of our attorneys (Carl, Lisa, and Zach) rode last year, and six other attorneys and staff members came out to support them. Together, they braved the strong winds and were proud to be a part of an organization that has raised more than $3 million for Autism research and awareness, which is a cause near and dear to our hearts. We believe a firm that bikes together stays together! See you out there on the road.

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CHERIE’S ICE CREAM SANDWICH SURPRISE

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S B R R B T Z B H A T T V

H O R I

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W I I M R V E F D Y W A Q H J G T M T R L A P N H M Z C N J A U H B A P K Z P U T A N H E S P R X S C X B J V S U M E D G O D K J V A U Y A L P S X I O V J B Y L N V T T N T M A S P O D B Q E E O H R U P H O T N M N N Z H H S D M F T O E U F L C U Y C B N E D V Q Q P O F K T D B W S J G V M N C A E B S M W A Y L G G G C B V X Y C D U D G U X F D X K D H Y A I Q G M I A G T R A V E L E H

INGREDIENTS

• 2 boxes ice cream sandwiches (24) • 2 8 oz. containers Cool Whip • Magic Shell chocolate

• Heath bar pieces • 1 9x13-inch pan

INSTRUCTIONS

1. Make one layer of 12 ice cream sandwiches in pan. 2. Add a layer of Cool Whip. 3. Squirt a layer of Magic Shell chocolate. 4. Sprinkle a layer of Heath pieces. 5. Repeat, making a second layer of all ingredients.

BEACH

BREAK

FUN

HOT PLAY

JUNE

OUTSIDE

SUMMER TRAVEL

SUN

BEACH

BREAK

FUN

HOT PLAY TAN

JUNE

OUTSIDE

TAN

VACATION

SUMMER TRAVEL

SUN

VACATION

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The Return of Chapter 22 Bankruptcy

How Being Open to Growth Leads to Success Trends & Traps in 2019

Legal ‘Spin’ Cherie’s Ice Cream Sandwich Surprise 4 Benefits of Traveling for Business

NO PLANE, NO GAIN 4 BENEFITS OF TRAVELING FOR BUSINESS

We don’t normally think of business trips as the most relaxing way to spend our time. Unlike vacations, the schedules are rigid, the mornings are early, and the conference rooms never seem to be a comfortable temperature. However, here are four benefits to going on business trips, both for your employer and yourself. ENHANCING YOUR ADAPTABILITY International business trips can be especially nerve-wracking. You might have to interact with people who speak a different language, figure out how to get to your hotel or conference center by yourself, or try a new restaurant out of your comfort zone. (Not every city has a Starbucks — at least, not yet.) While these may seem like negatives, they are actually opportunities to become more adaptable in everyday life. If you can roll with the punches in a new environment, you’ll be able to do it so much better during the daily grind. EXPANDING YOUR NETWORK Once you know everyone at your workplace, meeting new people becomes less likely. Business trips, and travel in general, are great ways to make new connections. A survey done by Virgin Atlantic in 2015 estimated that 1 in 5 people have done business with someone they met on a plane. There’s

potential to build social relationships too. Don’t be afraid to strike up a conversation with someone new!

IMPROVING YOUR CREATIVITY Being in a new environment naturally predisposes your mind to think differently than it normally does. Therefore, business trips are beneficial for brainstorming new strategies. You can’t just rely on what you know; you have to innovate and experiment. Once you’re back in the office, your newfound creativity will help you tackle challenges more effectively. RACKING UP THOSE FREQUENT FLYER MILES This benefit is more for you than for your job. If you anticipate a lot of business travel, sign up for a frequent flyer program and get points on your company’s dime. Put them toward that vacation you’ve been saving for without spending any of your own money. Of course, if your business trip leaves any room for R and R, take advantage of it. You might be there for work, but you’re in a new city with tons of opportunities to learn and explore. Just because you’re there on business doesn’t mean fun is out of the question.

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