Valence Technology, Inc. v. KPMG Corporate Finance, L.L.C. (In re: Valence Technology, Inc.)
- Summarized by ,
- 8 years 8 months ago
- Citation:
- Case No. 15-50381 (5th Cir. 05/04/16) (unpublished)
- Tag(s):
-
- Ruling:
- Per curiam:
Affirmed; language in Advisors' engagement agreements specifically carved out success fees payable for certain identified parties, making general exclusion of success fee for satisfaction of existing debts inapplicable to any consideration received from those identified parties. Because one of the identified parties swapped debt for equity, the Advisors were entitled to a success fee for the value of the debt forgiven.
.
Judge Owen dissenting:
Advisors should not be entitled to any success fee because:
(1) The value of the consideration given by Debtor's secured lender was not the amount of debt forgiven, but the net value of debt forgiven less equity received in exchange, which was $0;
(2) The purpose of the Advisors' engagement was to procure new equity, not a balance sheet restructuring, which Advisors failed to obtain; and
(3) The language of the engagement agreements still subjected the stated success fee for consideration received from secured lender to the general valuation for new equity infusion.
- Procedural context:
- Western District of Texas Bankruptcy Court awarded Advisors net fees of $595,000 each, calculated on the gross value of the debt forgiven by secured lender in exchange for equity of reorganized Debtor; Western District of Texas District Court affirmed.
- Facts:
- Chapter 11 debtor Valence Technologies, Inc. ("Debtor") retained KPMG Corporate Finance, LLC and Roth Capital Partners, LLC (collectively "Advisors") to assist Debtor in securing equity infusion, via private placements, as part of Debtor's overall restructuring efforts. Debtor and Advisors entered into engagement agreements that provided, among other things, for a success fee to the Advisors calculated at a percentage of the value of any private equity placements secured by the Advisors. The engagement agreements further reduced the applicable success fee.
.
Advisors were ultimately unable to obtain any new money for Debtor, but Debtor's single largest secured lender agreed to forgive $50 million of secured debt in exchange for 100% of the reorganized Debtor's equity. Advisors applied for a 1.25% success fee calculated on the $50 million value of the forgiven debt. Debtor disputed Advisors' entitlement to any success fees.
- Judge(s):
- Prado, Owen, and Haynes, Circuit Judges
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