Brown Rudnick Secures Deal for Creditors on Sale, New Debt in Coach USA Bankruptcy

Brown Rudnick won key concessions for unsecured creditors in a deal that allows Coach USA to proceed with an auction next month to sell its core business lines in the bus operator's Chapter 11 bankruptcy case.

The deal came after Brown Rudnick, co-counsel to the Official Committee of Unsecured Creditors, convinced a Delaware bankruptcy judge during a July 16 hearing in Wilmington not to approve Coach USA's $200 million debtor-in-possession (DIP) financing package and related sale proposal. U.S. Bankruptcy Judge Mary Walrath told Coach and its lenders to negotiate with the creditors for potential resolutions and return to court.

On July 19, Coach announced in court it had reached an agreement. Brown Rudnick partner Shari Dwoskin, who delivered the closing argument at the July 16 hearing that led to the negotiations, said during Friday's hearing that changes to the sales contract and the financing protect unsecured creditors and will ensure commuter services are not disrupted as Coach sells itself.

Coach USA, the owner and operator of Megabus and other privately-owned commuter bus lines in the U.S. and Canada, filed for bankruptcy protection on June 11, 2024 in Delaware.

The DIP lenders, led by Wells Fargo, planned to refinance $180 million of Coach debt and provide $20 million in new cash to fund Coach's plan to sell its Megabus commuter service at auction. The Renco Group had agreed to assume $130 million in Coach debt as part of a binding bid that would start an auction next month.

In Dwoskin's closing argument, she said that the new money provided under the DIP was insufficient to fund the administrative costs of the Chapter 11 case. She also argued that the sale and DIP transaction served as an impermissible sub rosa plan.

Judge Walrath agreed with Dwoskin that certain provisions of the DIP were impermissible, and said, as reported by Bloomberg, "I have a serious concern about having any provision that would adversely affect" the rights of unsecured creditors to challenge Wells Fargo's claim on thousands of buses.

At a continued hearing on the motions, on July 19, which followed several days of intense negotiations, the parties announced a settlement of the objections, which cleared the way for a consensual hearing on Coach's financing and bidding procedures motion.

Pursuant to the agreed orders, Renco, as purchaser of Coach's core business lines, will assume a certain amount of general unsecured claims. The Creditors' Committee, represented by Brown Rudnick, also obtained certain protections for unsecured creditors in the event the Renco sale does not close.

"The committee believes the result we were able to achieve in such a short time frame was really the best result for all stakeholders under the circumstances," Dwoskin said.

The Brown Rudnick team is led by restructuring partners Bennett Silverberg and Shari Dwoskin. The trial team was led by litigation partner Jim Stoll and associate Hayden Miller and supported by partner Steve Levine and associates Matt Sawyer, Alex Kasnetz, Andrew Rizkalla, Elizabeth Castano and paralegal Maddy Soliman.

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