disclosure-statement-plan-reorganization

# Disclosure Statement for Plan of Reorganization

Drafts a § 1125-compliant disclosure statement providing "adequate information" to enable a hypothetical reasonable investor of each class to make an informed judgment about the proposed plan.

## Prerequisites

1. **Case details** — debtor name, case number, court, filing date
2. **Plan of Reorganization** — final or near-final draft
3. **Financial records** — P&L, balance sheets, cash flow (min. 3 years)
4. **Schedules and SOFA** — filed schedules of assets/liabilities, statement of financial affairs
5. **Asset appraisals** — valuations for significant estate property
6. **Exit financing** — term sheets, LOIs, or DIP financing terms
7. **Claims register or bar date order** — for creditor classification
8. **Executory contracts/leases** — with assume/reject decisions

## Quick Start

1. Gather all prerequisites; confirm Plan draft is near-final
2. Draft sections 1–8 below, cross-checking every figure against the Plan
3. Run the guidelines checklist before finalizing
4. Submit to court for approval under § 1125 — do not solicit votes until approval order is entered

## Output Structure

### 1. Introduction

- Debtor, case number, court, petition date
- State § 1125 "adequate information" standard
- Section roadmap and cross-reference to Plan

### 2. Debtor Background

| Element | Content |
|---|---|
| Corporate history | Formation, ownership, key subsidiaries |
| Operations | Revenue streams, customers, geography |
| Assets | Categories with current valuations |
| Liabilities | Secured, priority, general unsecured — with amounts |
| Events of distress | Precipitating factors (operational, market, structural) |

### 3. Class Treatment Summary

| Class | Description | Impaired? | Treatment | Est. Recovery % |
|---|---|---|---|---|
| Admin/Priority | § 507 claims | No (deemed accept) | Paid in full on effective date | 100% |
| Class 1 | Secured | [Yes/No] | [Cramdown / reinstatement / payoff] | [X%] |
| Class 2 | General unsecured | Yes | [Pro rata / % payout / new equity] | [X%] |
| Class 3 | Equity interests | [Yes/No] | [Retained / cancelled / new issuance] | [X%] |

Flag which classes are deemed to accept (unimpaired) or reject (receive nothing) and do not vote.

### 4. Financial Projections and Feasibility

- **Historical**: 3-year P&L, balance sheet, cash flow
- **Projections**: 3–5 years — revenues, expenses, EBITDA, debt service
- **Assumptions**: State explicitly (growth rate, cost savings, headcount, CapEx)
- **Liquidation analysis**: Side-by-side Plan recovery vs. Chapter 7 proceeds per class (required)
- **Feasibility**: Address § 1129(a)(11) — plan not likely followed by further liquidation or reorganization

### 5. Risk Factors

- **Confirmation**: Feasibility challenges, fair-and-equitable objections, cramdown disputes
- **Operational**: Customer concentration, regulatory exposure, key-person dependency
- **Legal**: Pending litigation, preference/fraudulent transfer exposure, disputed claims
- **Funding**: Exit financing contingencies, asset sale completion, DIP maturity

### 6. Implementation and Funding

- **Sources**: Cash on hand, operations, asset sales, new equity, exit facility, litigation recoveries
- **Exit financing details**: Lender, amount, conditions precedent, status
- **Distribution timeline**: Effective date trigger, initial distribution, periodic schedule
- **Executory contracts**: Table of assumed, assigned, and rejected — with rejection damage treatment
- **Restructuring steps**: Entity mergers, asset transfers, new governance

### 7. Voting and Confirmation

- **Voting deadline**: [DATE]
- **Ballot submission**: Method, address, instructions
- **Confirmation standards** (§ 1129): at least one impaired accepting class (excluding insiders); feasibility; good faith; fair and equitable to non-consenting classes
- **Hearing**: Date, time, courtroom
- **Objection deadline**: [DATE — typically 7 days before hearing per local rules]
- **Effect**: Discharge of pre-petition debts; binding on all parties

### 8. Conclusion

- Recommendation to vote in favor
- Why Plan is superior to liquidation or competing plan
- Counsel contact information
- Forward-looking statement disclaimer

## Guidelines

- **Plan consistency**: Every treatment, amount, and timing must match the Plan exactly — discrepancies are grounds for disapproval
- **Plain language**: Class treatments must be readable by lay creditors; define all terms on first use
- **Bluebook citations**: All statutory, rule, and case citations in proper format
- **Source attribution**: Pinpoint-cite factual assertions to case record documents
- **Liquidation analysis**: Must be prepared by a qualified financial advisor or state methodology — flag for client's financial professional
- **Local rules**: Verify voting procedures, notice requirements, and objection deadlines against applicable district rules [VERIFY per district]
- **Projections disclaimer**: Include forward-looking statement disclaimer per USTP guidelines
- **§ 1125(d)**: Court must approve disclosure statement before vote solicitation — never solicit before approval order entry