Stream TV Networks Chapter 11 bankruptcy cases dismissed by court

By Sarah Lizee

Olympia, Wash., May 17 – Stream TV Networks, Inc.’s Chapter 11 bankruptcy cases were dismissed Monday by the U.S. Bankruptcy Court for the District of Delaware, according to an order.

As previously reported, secured creditors SeeCubic, Inc. and SLS Holdings VI, LLC had filed a motion for dismissal, claiming the bankruptcy petition was filed in bad faith.

SeeCubic and SLS had claimed that, despite Stream being “an empty shell” of a corporation, the debtor’s petition claimed that it held between $100 to 500 million in assets and that it expected that funds would be available for distribution to unsecured creditors.

The secured creditors said that the company also did not apprise any of its key constituents that it intended to seek relief in the court, despite the fact that Stream and its controlling founders remain subject to an ongoing order issued by the Delaware Court of Chancery enjoining them from taking virtually any action with respect to Stream or its assets.

The Court of Chancery had granted SeeCubic a preliminary injunction against the debtor and the controlling founders, and said in an opinion that the controlling founders had fraudulently backdated a stockholder consent in an attempt to terminate a valid agreement between SeeCubic and Stream that resulted in the transfer of Stream’s assets to its secured lenders after Stream defaulted on more than $50 million of principal secured debt.

Stream had agreed to transfer all of its assets to SeeCubic, which is a newly formed entity controlled by its secured creditors. Stream also granted its secured creditors a power of attorney to effectuate the transfers. Stream’s secured creditors already held security interests in all of Stream’s assets and had the right to foreclose on those assets, SeeCubic and SLS said.

Stream’s secured creditors had agreed to release their claims against Stream upon completion of the transfer of Stream’s assets to SeeCubic.

The secured creditors said that Stream’s Chapter 11 filing is a bad-faith litigation tactic by the controlling founders, who are seeking to avoid the Chancery Court’s entry of summary judgment in favor of SeeCubic, and against Stream and the controlling founders, with respect to the validity and enforceability of the agreement.

“Stream commenced its Chapter 11 case only two days before briefing was to be completed on SeeCubic’s motion for summary judgment, which the Chancery Court already indicated would be entered based on the record before it,” the secured creditors said.

SeeCubic and SLS said that following the transfer of substantially all of Stream’s assets to SeeCubic, Stream has no meaningful business assets, employees, or ongoing operations to reorganize.

“There is no legitimate basis for this Chapter 11 case to proceed, and it should be dismissed,” the secured creditors said.

In addition, Regions 3 and 9 U.S. trustee Andrew R. Vara filed a motion seeking either dismissal or conversion of the case.

“Displeased with a state court order enjoining the debtor from asserting ownership over its assets, the debtor appears to have filed this Chapter 11 case solely to reap to the benefit of the automatic stay, to gain a tactical advantage, and to collaterally attack the state court order confirming the validity an agreement whereby the debtor agreed to transfer all its assets to its secured creditors in lieu of foreclosure,” the U.S. trustee had said in his motion.

“The debtor, therefore, filed this case in bad faith under section 1112(b) of the code, warranting dismissal of this case.”

The official committee of unsecured creditors also filed documents in support of the motions to dismiss the case.

“After a thorough, albeit compressed, investigation, the committee believes it is in the best interests of general unsecured creditors that the motions to dismiss be granted,” the committee said in its statement. “The committee did not reach its conclusion lightly.”

Stream TV Networks is a Philadelphia-based developer and retailer of 3D televisions, tablets and other personal electronics. The company filed bankruptcy on Feb. 24 under Chapter 11 case number 21-10433.

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