Thread by @MaxKennerly

Okay, who wants a bedtime story to help them go to sleep? By which I mean what was really going on in the "Big Cajun" part of the @NYTimes story on Elizabeth Warren. NYT dresses it up like some legal thriller, but it's more like this:

/1

https://twitter.com/OFalafel/status/940298910815440896

Cajun, a nonprofit rural power cooperative made up of 12 member cooperatives, went bankrupt. As is typical, the bulk of its assets went up for auction. Three groups put up bids: Louisiana Generating, Enron + the unsecured creditors, and SWEPCO + 10 of the members.

Zzzzzz.

/2

The bids from Louisiana Gen and Enron involved carrying forward the member's prior agreements. SWEPCO's bid involved renegotiating them; you can see why most of the members liked that. All of the bids included some reimbursement of members' expenses.

Zzzzzz.

/3

SWEPCO's bid would pay some of the members' legal fees. The trustee objected, and the bankruptcy court said "yeah, it's fine, but I have to approve them." The trustee appealed to the district court, which said "you cannot do that, your bid is disqualified."

Huh?

/4

That was weird, it's not like the bankrupt company was paying it, it's SWEPCO's own money. There are bankruptcy provisions against bribing creditors to vote for a bid, but everybody agreed that wasn't an issue here: the members' votes were meaningless and "not worth buying."

/5

Warren gets involved for the appeal, joining the ten other lawyers for SWEPCO and the member co-ops supporting the bid. Why? It wouldn't be lucrative work. Maybe it just plain bothered her--it's inconsistent and sets up more litigation games I was talking about earlier. /6

The NYTimes portrays her description of it as false. Except, what she wrote is correct: if this bid had succeeded, then the co-op member companies would've owned Cajun's assets alongside SWEPCO. Most of them preferred that to it being owned by Louisiana Gen or Enron. /7

In the end, the Fifth Circuit completely reversed the district court's disqualification of the bid, and told the bankruptcy court it didn't need to pre-approve the transaction, just review it later. The SWEPCO + member co-op bid then lost.

Like I said: zzzzzzzzz. /8

Today, 20 years later, every court takes the same approach Warren advocated on this exceedingly dry and technical issue that arises solely when companies bid on bankrupt companies' assets. And the net result is a cleaner, simpler, more consistent bankruptcy system.

Zzzzzzz. /end