On 5/23/2019 (the “Petition Date”), Enalasys Corporation  (“the Debtor” or “the Proponent”) filed a voluntary petition under Chapter 11 of Title 11 of the United States Code. The Debtor does development, marketing, and sales of heating and air conditioning related products and services, especially those related to environmental matters. The Debtor continues as debtor-in-possession pursuant to Bankruptcy Code §§ 1107 and 1108 of the Bankruptcy Code.

Chapter 11 allows the Debtor, and under some circumstances, creditors and other parties in interest, to propose a plan of reorganization (“Plan”). The Plan may provide for the Debtor to reorganize by continuing to operate, to liquidate by selling assets of the estate, or a combination of both. The Debtor is the party proposing the Plan that is available for download below; a complete disclosure statement is also available below.

The Debtor has proposed a reorganization plan.  In other words, the Proponent seeks to accomplish payments under the Plan by restructuring its financial affairs and paying the creditors with post-petition earnings derived from revenue earned by the Debtor.  The Effective Date of the proposed Plan is fifteen (15) days after entry of the order confirming the plan.

 

You can download the complete Chapter 11 Plan by clicking here.

You can download the complete Disclosure Statement for the Chapter 11 Plan by clicking here.

You can download the supplement to the Disclosure Statement by clicking here.

You can download the Form for Shareholders to Elect Class 1 Treatment B by clicking here.

 

 

Excerpt from the Chapter 11 Plan related to Interest Holders (i.e., shareholders)

 

CLASS: 1

Interest holders are the parties who hold ownership interest (i.e., equity interest) in the Debtor.  If the Debtor is a corporation, entities holding preferred or common stock in the Debtor are interest holders.  If the Debtor is a partnership, the interest holders include both general and limited partners.  If the Debtor is an individual, the Debtor is the interest holder.

In this proceeding, the Debtor is a corporation, therefore the shareholders are the interest holders.

Multiple Treatment Possibilities:  The Debtor proposes to administer Class 1 members on one of two of the following terms, with each class member selecting which plan treatment it desires within 60 days of the Effective Date on a form to be mailed to the Class 1 members together with the Disclosure Statement and Chapter 11 Plan; a copy of the Selection Form is attached to the Disclosure Statement as Exhibit G and will be available online at https://www.OCDebtrelief.com and is accessible by all Class 1 members. [A copy of the Selection Form is available by clicking here].   Both of the possible Class 1 member treatments are described below.  Once a designated treatment is elected, it cannot be changed.  If no election for treatment is made by a Class 1 member, Class 1 Treatment A will be the default treatment for Class 1 members.  As such, the only Class 1 members that need to return the Selection Form are those that are electing Class 1 Treatment B.

While Class 1 members, the shareholders of the Debtor, are given two options for treatment under the Chapter 11 plan, neither of these treatments will pay anything to the Class 1 members until the other Classes have been paid in full. The two options for Class 1 members are to either 1.) to retain their equity interest in the reorganized Debtor, or 2.) liquidate their equity interest in the Debtor through a stock repurchase by the Reorganized Debtor on terms that will pay the Class 1 member 10% of their original stock purchase amount in surrender of all of their equity interest in the Debtor.

 

Class 1 Treatment A

Class 1 Treatment A allows the Class 1 members to retain their equity interest in the Debtor.  For the shareholders that retain their equity interest, there are two primary intended potential routes of recovery for the shareholders. First, the Debtor may at some point resume operations with assets that are recovered through its litigation efforts; this could result in dividends to the shareholders or an increase in value of their equity interest that the shareholder could potentially liquidate at some future time.  Second, the Debtor may ultimately cease operations and liquidate its assets entirely to pay the remaining interest holders the entire resulting “net pot” from the liquidation on pro rata terms.  For purposes of this provision, “net pot” is defined as the remaining funds after payment of all other obligations of the Reorganized Debtor, including those obligations arising from the Chapter 11 Plan.  Furthermore, the payment of those shareholders electing to retain their equity interest would be subordinated to those Class 1 members that had elected to liquidate their equity interest through the stock repurchase offer described below as Class 1 Treatment B.

Continued operations of the Debtor is a HIGHLY SPECULATIVE VENTURE that may never occur or generate any revenue to be distributed to the shareholders.  In order for the Debtor to resume its operations in the energy efficiency industry, it would be necessary for the Debtor to be able to actually recover assets that were lost by the prior management, including, but not limited to, patents and intellectual property.  This outcome, however, is highly speculative and would depend on the Debtor being able to reacquire the lost assets, develop a business plan, hire employees to implement the business plan, and then execute the business plan with the new employees and assets.  In other words, the Debtor would be re-starting a business venture very much like a high-risk start-up, and Class 1 members should be aware of these risks when electing their treatment under the Chapter 11 plan.

 

Class 1 Treatment B

Class 1 Treatment B allows the Class 1 members to liquidate their equity interest in the Debtor through a stock repurchase by the Reorganized Debtor on terms that will pay the Class 1 member 10% of their original stock purchase amount in surrender of all of their equity interest in the Debtor.  For example, if a Class 1 member paid $10,000 to the Debtor for purchase of 1000 shares of common stock, and the member elects Class 1 Treatment B, they will be paid a total of $1,000 from the Reorganized Debtor as provided herein, and the member will surrender their stock to the Reorganized Debtor and retain no ownership interest in the Reorganized Debtor.

If the Class 1 members elect to liquidate their equity interest in the Debtor through the stock repurchase offer, they must immediately surrender their stock to the Reorganized Debtor by returning the original stock certificates to the Reorganized Debtor as instructed on the Selection Form.  Thereafter, the Class 1 member will be paid from the funds recovered through the litigation efforts, liquidation of assets (if any), or future operations of the Debtor (if any), as funds become available for distribution to these Class 1 members in the sole discretion of the Debtor.  Class 1 members electing this treatment should note that they may never actually receive payment if the Debtor either never generates sufficient funds to pay these members or determines that the funds need to be retained as operating capital for the Debtor to continue in operation.

 

 

You can download the complete Chapter 11 Plan by clicking here.

You can download the complete Disclosure Statement for the Chapter 11 Plan by clicking here.

You can download the supplement to the Disclosure Statement by clicking here.

You can download the Form for Shareholders to Elect Class 1 Treatment B by clicking here.