Legal Definitions - primary committee

A primary committee, within the context of bankruptcy proceedings, refers to a formal group of a debtor's creditors. This committee is officially recognized and organized to collaborate directly with the debtor to develop and propose a comprehensive plan for reorganizing the debtor's finances and operations. The goal is to resolve outstanding debts and enable the debtor to continue functioning, often under new terms.

• Imagine a major airline, "SkyHigh Airways," files for Chapter 11 bankruptcy due to overwhelming debt. The bankruptcy court authorizes the formation of a primary committee. This committee includes representatives from SkyHigh's largest unsecured creditors, such as its primary aircraft leasing companies, major fuel suppliers, and the union representing its pilots (who are owed back wages and pension contributions). The committee's role is to work closely with SkyHigh's management and legal team to draft a detailed reorganization plan, which might involve selling older aircraft, renegotiating labor contracts, and proposing a schedule for paying off its various creditors, all with the aim of allowing the airline to emerge from bankruptcy as a financially stable entity.

  Explanation: This scenario illustrates a primary committee because it involves a formal group of creditors (leasing companies, suppliers, union) of a debtor (SkyHigh Airways) in bankruptcy, actively collaborating to create a reorganization plan that addresses debt repayment and future operations.

• Consider "Bookworm Haven," a national bookstore chain, facing severe financial distress and filing for bankruptcy. To ensure the creditors' interests are represented, a primary committee is established. This committee is composed of representatives from Bookworm Haven's largest landlords (who are owed significant rent), major book publishers, and its primary distributor. The committee's task is to engage in negotiations with Bookworm Haven's executives to formulate a reorganization plan. This plan could include closing unprofitable store locations, renegotiating lease agreements, and proposing a structured repayment schedule for publishers and distributors, all designed to help the bookstore chain survive and continue operating in a more sustainable way.

  Explanation: This example demonstrates a primary committee as a group of creditors (landlords, publishers, distributor) working directly with the debtor (Bookworm Haven) during bankruptcy to develop a plan for financial restructuring and business continuity.

• Suppose "Community Care Hospitals," a regional hospital system, files for Chapter 11 bankruptcy due to mounting operational costs and unpaid insurance claims. A primary committee is formed, comprising representatives from its largest medical supply vendors, pharmaceutical companies, and a significant bondholder group. This committee's responsibility is to scrutinize Community Care's financial health and collaborate with hospital administration to devise a reorganization plan. This plan might involve selling off non-essential clinics, streamlining administrative functions, or negotiating new payment terms with insurers, all with the objective of ensuring the hospital system can continue providing essential healthcare services while addressing its financial obligations.

  Explanation: This illustrates a primary committee as a formal assembly of creditors (vendors, pharmaceutical companies, bondholders) of a debtor (Community Care Hospitals) in bankruptcy, working together to create a plan for financial recovery and continued operation.