Richard C. Pedone

/My focus

Distressed M&A

Much of my work is focused on developing and implementing strategies for the purchase and sale of businesses and/or assets that are financially distressed or encumbered by disputes or litigation that could precipitate financial distress. Many of these transactions are implemented through Chapter 11 “363” sales, Article 9 foreclosures, assignments for the benefit of creditor and receivership processes.

Skilled Nursing, Hospital and Other Healthcare Insolvencies

In addition to serving as debtors’ counsel in a Chapter 11 restructuring of skilled nursing facilities that culminated in a confirmed plan of reorganization and the elimination of personal guaranties granted by the principals, I have represented variety of other participants in extraordinarily complicated healthcare restructuring matters. These engagements have included: a multi-year confidential restructuring of a chain of skilled nursing facilities that provided deeply discounted payments to unsecured creditors without generating adverse publicity, coordinating receiverships of skilled nursing facilities, and receivership litigation against a large skilled nursing chain. I also regularly provide advice in connection with the sale of distressed provider practices. In connection with the Steward bankruptcy sale processes we represented several significant contract counterparties.

Financial Default and Cross-Border Insolvency Disputes

I have represented corporate trust fiduciaries in dozens of matters involving litigation and/or bankruptcy. Examples include: representing an indenture trustee in connection with $1.8 billion of debt in the Energy Future Holdings Bankruptcy, the world’s largest failed LBO; the resolution through Chapter 15 of a difficult cross-border default; first chair trial of bondholders’ rights to $230 million in prepayment premiums and valuation of fourteen power plants; and numerous securitization and swap-related bankruptcy matters and plan litigation related to corporate governance. Many of these disputes have involved insolvency proceedings pending in multiple jurisdictions.

Financial Fraud Litigation and Related Franchise Matters

Many of the most difficult financial disputes today, whether in or out of bankruptcy court, involve allegations of fraud. Litigation concerning such disputes frequently triggers financial distress. Matters that I have handled include the representation of a franchisor whose lender/investor accused it of fraudulent conduct, the representation of a hedge fund that was the victim of a Ponzi scheme in litigation and then the commencement of an involuntary bankruptcy case and the representation of franchisors such as Planet Fitness and Dunkin’ Donuts in disputes with their franchisees.

Other Services

I also provide corporate governance and liability avoidance advice to private equity firms, and directors and officers dealing with special situations. In addition, I serve as outside general counsel to several growing businesses and as a member of the board of advisors for a specialty financial services firm.

/Representative experience

Representative Restructuring and Distressed Assets

• Confidential skilled nursing restructuring. Represented skilled nursing chain (30+ facilities) and its owner in out-of-court restructuring and extensive defensive creditor litigation to facilitate the restructuring. Achieved restructuring on a confidential basis, disposed of certain facilities, and avoided complexities and cost of Chapter 11 process
• Wachusett Ventures. Chapter 11 counsel for debtors culminating in successful reorganization of skilled nursing chain
• Confidential skilled nursing matter. Served as counsel to majority owner of LLC in connection with distressed lease portfolio, member disputes, and related litigation
• Hertz Bankruptcy. Represent U.S. Bank as bond trustee in connection with Hertz bankruptcy cases and ongoing litigation and appeals related to lender entitlement to post-petition interest and damages
• PG&E Bankruptcy. Represented California Self Insurance Security Fund in connection with obtaining adequate protection liens and claims
• Confidential skilled nursing matter. Advised board of skilled nursing facilities in connection with restructuring with bond lenders and distressed sale
• Confidential memory care facility matter. Advised board of distressed memory care facility in connection with restructuring and bond holder negotiations
• Energy Future Holdings Corp. Represent unsecured bond trustee in connection with $1.8 billion debt in the bankruptcy cases of Energy Future Holdings Corp. and 70 of its affiliates (collectively, “EFH”) in the Delaware Bankruptcy Court. EFH was the largest generator, distributor, and retail provider of electricity in Texas, with more than 40 coal, nuclear, and gas-fired power plants. The cases are the product of the largest leveraged buy-out in history. With over $49 billion in liabilities and $36 billion in assets, EFH’s Chapter 11 case is also the largest operating Chapter 11 case ever filed in Delaware. Work included litigation related to appointment of creditors’ committee, evaluation of claims arising out of the LBO, litigation related to corporate governance, intercompany claims, bond holder entitlement to post-petition interest, makewhole premiums totaling more than $200 million, potential violations of Trust Indenture Act, value of net operating losses (NOLs) and contested plan of reorganization.
• In re: Lehman Brothers Holdings, Inc. Representing corporate trust and finance clients in connection with derivatives contracts and variety of other issues, including cross-border matters related to Lehman affiliates. Derivative disputes involved over $600 million. Work includes ongoing litigation concerning allowance of RMBS “put-back” claims and defense of litigation related to CDO distributions.
• In re: The Educational Resources Institute (“TERI”). Represented U.S. Bank as indenture trustee for 19 trusts holding debt secured by student loans in connection with bankruptcy of guarantor. Litigated perfection issues and crafted settlement and voting procedures allowing approval of compromise.
• In re: Calpine. Represented Wilmington Trust Company as collateral agent and trustee for approximately $2.4 billion in debt secured by 14 power plants. Managed intercreditor disputes with second and third lien debt; litigated and conducted trial of parties’ rights to default interest and prepayment premiums; argued district court appeal regarding prepayment dispute.
• Mortgage originator bankruptcies. Represented corporate trust clients in connection with mortgage originator bankruptcies.
• GT Advanced Technologies. Served as local bankruptcy counsel to Apple supplier GT Advanced Technologies in case filed to address issues raised by contracts with Apple.
• Supervalu. Represented California Self-Insurers Security Fund in connection with lien enforcement related to nearly $1 billion claim. Coordinated negotiation and litigation of lien rights and eventual modification in connection with sale to purchasing entity sponsored by Cerberus.
• Connect EDU (BK.SDNY). Represented venture capital lender and investor in SDNY Chapter 11 and purchase/lift-out of subsidiary using claims to credit bid.
• Confidential. Advised higher education provider on restructuring matters following termination of Title IV eligibility.

Receivership Matters

• Asian Grocery Chain.Represented receiver in connection with Delaware Federal Court Receivership for grocery store chain, related litigation, fraud investigations, and sale process
• Stanford International Bank Receivership. Represent largest defrauded investor and fraudulent transfer defendants in defense of claims and appeals related to setoff rights and other matters

Illustrative Cross-border Restructuring Matters

• In re: Tembec. Represented HSBC as indenture trustee in connection with CBCA proceeding in Toronto and Chapter 15 proceeding in New York related to unsecured indentures totaling more than $1 billion.
• NewSat.Advised Australian satellite operator on debt and restructuring options in USA and abroad.
• Confidential. Advised IP licensee on issues related to licensor’s insolvency and rights across multiple jurisdictions
• Confidential. Advised online auction business on restructuring and sale with business lines in multiple jurisdictions

Corporate Governance and Advice to Directors and Officers

• Confidential. Advised investor in connection with potential claims arising out of distribution in excess of $1 billion
• Confidential. Advised public company executive of bankrupt business in connection with D&O claims brought by liquidating trustee and management of mass tort claims
• Confidential. Advised venture investor and director in connection with potential claims and wind-down of business through California receivership.
• Confidential. Advised venture investor and director in connection with bankruptcy and obtaining releases.
• Software Company (confidential). Advise executives of software company regarding potential personal liability and claims against former director.

Franchise Disputes and Franchise Related Restructuring Matters

• Planet Fitness. Represented Planet Fitness and investors in litigation concerning breaches of fiduciary duties and other matters against system’s largest franchisee. Negotiated purchase/transfer of certain assets of franchisee to resolve matter. Other representation of Planet Fitness included contested confirmation trial in bankruptcy of significant multi-unit franchisee.
• Confidential. Represented franchisor as lender and franchisor in connection with workout matter involving multi-unit franchisee.
• In re: Ground Round. Represented 38 franchisees of Ground Round restaurant chain in franchisor’s bankruptcy. Coordinated prosecution of claims by franchisees to purchase franchise system out of bankruptcy using claims as payment. Conducted claims and related bankruptcy litigation and negotiated sale of company to new “cooperative” established by franchisees. Negotiated and litigated lease assignments, conducted evidentiary hearings, and defended related appeal.
• Confidential National Multi-brand Franchisor. Represented franchisor in connection with resolution of disputes with lender and investor through confidential mediation with former bankruptcy judge. Structured sale to lender/investor.
• Dunkin’ Donuts. Represented Dunkin’ as franchisor and lender in multi-unit franchisee bankruptcy. Prosecuted franchise-related and secured claims. Managed bankruptcy sale process, including issues related to assumption and assignment of franchise agreements and enforcement of rights of first refusal.
• CleanNet of New England. Represented cleaning system debtor in Chapter 11 case brought to resolve litigation over status of franchisees as employees.

Real Estate Restructuring Matters

• 185 Devonshire St. Represented lender and then purchaser of debt and foreclosing party. Conducted foreclosure on office building in Boston’s financial district and managed related commercial lease disputes.
• Carnegie Abbey. Represented agent in workout of $184 million construction loan secured by luxury condominiums on Narraganset Bay.
• Forbes Park. Represented lender in workout and foreclosure sale of partially completed 300-unit apartment complex on 17 acres of environmentally challenged urban waterfront land.
• In re: Cold Spring Golf Course, Inc. Represented golf course contractor and used claims to propose and obtain confirmation of third-party plan forcing sale of course and related development to contractor.

/Looking ahead

Increasingly, financial disputes will involve proceedings pending in multiple countries. Businesses that invested in China and other countries with unique legal systems will find unprecedented opportunities and legal/political challenges as these systems face financial stress.

/Insights

Publications

• “Franchisee Fraud: When Fraud Threatens a Franchisor’s Good Name,” Journal of Corporate Renewal, May 2018, (Co-author)
• “The Evolution of Chinese Bankruptcy Law: Challenges of a Growing Practice Area, Inside the Minds: Recent Developments in Bankruptcy Law in China”; Aspatore Books, 2010. (Co-author)

Presentations and Legal Education Activity

• Speaker, “Distressed M&A Toolkit for Transactional Attorneys,” MCBA CLE
• Lecturer, “Co-Operation and Co-Ordination in Practice” (with S. Atkins & T. Graulich), INSOL International Global Insolvency Practice Course, Dubai
• Moderator, “Current Issues in Oil and Gas Bankruptcies,” American Bankruptcy Institute Northeast Conference
• Speaker, “Driving Value out of Distress: Target Identification and Due Diligence,” The Deal
• Speaker on shifting alliances and strategy in a franchise bankruptcy case, American Bankruptcy Institute Northeast Conference
• Speaker on Cross-Border Insolvency Issues at presentation on Bankruptcy and the Global Economic Crisis, Italy-America Chamber of Commerce
• Panelist, “The Derivatives Market, What Comes Next,” discussing impact of bankruptcy on derivatives contracts
• Speaker, “Bankruptcy Issues in Franchising,” International Franchise Association Legal Forum
• Panelist, Harvard Business School Symposium on Turnaround Management
• Speaker on bankruptcy issues, commercial lease drafting and negotiation
• Speaker and award recipient, Turnaround Management Association
• Speaker, “Expert Witness Discovery Issues in Bankruptcy,” Boston Bar Association