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Court Orders Liberty Power Corp. To Turn Over Books and Records To Bankrupt Liberty Power Holdings

April 23, 2021

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Copyright 2010-21
Reporting by Paul Ring •

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A bankruptcy court has granted a motion, in its entirety, directing Liberty Power Corp. ('ParentCo' or 'LPC') to turn over all books, records, systems and processes of and related to the operation of Liberty Power Holdings (the 'Debtor' or 'Holdings'), which has filed for Ch. 11 bankruptcy protection.

As previously reported, Liberty Power Corp. is the ultimate parent of Liberty Power Holdings.

Liberty Power Corp., LLC ('ParentCo') provided management and operating services to Liberty Power Holdings

Liberty Power Holdings defaulted on a supply/credit agreement with Boston Energy Trading and Marketing LLC (BETM) due to events related to the ERCOT winter event

As a result, BETM exercised certain of its rights and remedies under a Pledge Agreement with Holdings and, among other things, reconstituted the Board of Managers of Holdings. Thereafter, on April 16, 2021, the newly constituted Board of Managers of Holdings held a meeting and engaged a Chief Restructuring Officer to provide certain financial advisory and restructuring services to Holdings

See more details on Holdings; bankruptcy petition here

Liberty Power Corp. (aka LPC or ParentCo) has said, "BETM had a security interest against substantially all of the Debtor’s assets, but not the assets of LPC. Similarly, BETM had a pledge of the membership interest of the Debtor’s direct corporate parent, Liberty Power Super Holdings LLC ('Super Holdings'), but no corresponding pledge of the membership interest of LPC."

LPC had said that it depends on revenue from the Debtor to reimburse its expenses incurred pursuant to a Management Services Agreement. "Without this revenue – which only included reimbursement of expenses and did not include any profit margin – LPC has no way of paying the employees or vendors necessary for its business and for the Debtor’s business."

ParentCo had alleged in a court filing that, "By letter dated April 15, 2021 (the 'Step-In Letter'), BETM attempted to sever the Debtor from LPC when it purported to take control of Super Holdings, and to reconstitute the Debtor’s Board of Managers. Among the attachments to the Step-In Letter were draft board resolutions authorizing a bankruptcy filing. Faced with the prospect that its only significant source of revenue would file for bankruptcy on some unknown date over the next few weeks or months, LPC exercised its contractual right to request that the Debtor shift from paying LPC in arrears for its expenses and immediately pay a total of $1,453,883.26, which would allow LPC to pay outstanding amounts owed to employees and vendors, and would fund the next two weeks of payroll. When BETM refused to pay all but one-third of this amount, which would leave (and has left) LPC with unreimbursed employee and substantial unpaid expenses owed by the Debtor, LPC – fearing it could not continue to incur expenses and employee costs with no ability to pay them – had no choice but to shut down."

The shut down included the termination of nearly all employees of Liberty Power

"While LPC reached out to BETM over the next two days to try to reach some agreement that would allow LPC to be put back together, these negotiations were unsuccessful. Of note, for purposes of this Response, LPC reached out to BETM the night before this bankruptcy was filed with an offer that included cooperation in a bankruptcy, and again reached out to BETM after the bankruptcy was filed, but before Turnover Motion was filed, with a request to continue the discussions from the prior evening and that, as, a sign of good faith, it was willing to discuss potential options for providing BETM with access to the documents and records the BETM-controlled Debtor now seeks pursuant to the Turnover Motion," ParentCo had said

Holdings sought a court order to, "compel turnover [by ParentCo] of the Debtor’s books, records, systems and processes to as to [sic] enable the CRO to try to preserve and protect and value of the Debtor’s business for the benefit of all of its stakeholders."

In addressing this motion, the Court said that, "the relief requested in the [Debtor's] Motion and granted herein is in the best interests of the Debtor’s estate, its creditors, its equity holders, and other parties-in-interest," and that, "good and sufficient cause exists for the granting of the relief requested pursuant herein."

The Court ordered that Liberty Power Corp, LLC ('ParentCo'), its principals and persons in control of ParentCo, are directed to provide immediate access and turnover to the Debtor, through the Chief Restructuring Officer and BRG, of all books, records, systems and processes of and related to the operation of the Debtor’s business (the 'Books and Records').

"ParentCo shall provide the Debtor with full access to and use of ParentCo’s systems and processes so as to enable the Debtor to operate its business pending further order of the Court," the Court ordered

"ParentCo shall provide the Debtor, through the CRO and [consultant] BRG, immediate access to the corporate premises, under the control of ParentCo at which the Debtor’s records are maintained and its operations are conducted so as to enable the Debtor to continue to operate its business," the Court ordered

"ParentCo shall cooperate and comply with any and all other requests of the Debtor (through the CRO) for documents and information necessary for the Debtor to continue its operations and comply with its obligations under the Bankruptcy Code," the Court ordered

"ParentCo, its principals, persons in control, agents, and representatives, shall comply with the automatic stay under section 362(a) of the Bankruptcy Code," the Court ordered

"ParentCo, its principals, persons in control, agents, and representative, are enjoined from taking any action against or in respect of property of the Debtor’s estate," the Court ordered

In opposing the specific relief sought by Debtor, ParentCo (aka LPC) had said, among other things, "LPC objects to the Turnover Motion to the extent it requests turnover of any property belonging to LPC or entities who are not before the Court. ...[T]he Debtor’s assets, which consist primarily of data, are stored on LPC’s computer system and require LPC’s software to be accessed. This software and the accompanying computer system are the crown jewel of LPC’s assets, the result of tens of millions of dollars of development costs. If the Debtor’s Turnover Motion is granted in the form suggested – including (i) that the Debtor have access to the systems and processes related to the operation of the Debtor’s business, (ii) that the Debtor (through its CRO) be given immediate and unfettered access to the corporate premises (which are primarily LPC’s corporate premises); and (iii) that LPC comply with all other requests of the Debtor (through the CRO) for documents and information necessary for the Debtor to continue its operations and comply with its obligations under the Bankruptcy Code – the Debtor will have effectively procured the benefit of LPC’s assets and systems, and will be able to force LPC to help prepare and run the bankruptcy case that BETM devised to force LPC to help BETM liquidate its collateral – even though BETM never had a security interest in the LPC assets. The Debtor is entitled to the turnover of its property, not LPC’s. The Debtor’s requests go too far."

The case is 0:2021bk13797, filed in United States Bankruptcy Court, Southern District of Florida

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