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< Return to Firm News ST&G Successfully Defends the Chapter 9 Filing by Valley Health System
In a published decision, Judge Caroll upheld the chapter 9 filing by Valley Health System, a California Local Health Care District (the "District"). An indenture trustee for bonds issued by the District had filed an objection to the District's petition, claiming that the District was ineligible for relief under chapter 9 because the District had failed to attempt to negotiate an adjustment of its debts with its major creditors prior to the filing of the petition ST&G argued on behalf of the District, however, that such negotiation was impracticable, and presented evidence supporting this contention. The bankruptcy court agreed with the District and found that negotiations by the debtor with its creditors were impracticable because voters had rejected the district's measures to refinance its debts or sell substantially all of its assets, and there was insufficient time for the district to negotiate a realistic plan of adjustment with its numerous creditors in face of a continuing liquidity crisis and risk of loss to its assets. Accordingly, the Court declined to dismiss the chapter 9 petition. See In re Valley Health Sys., 383 B.R. 156 (Bankr. C.D. Cal. 2008).
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