On July 12, 2015, Gulf Coast marine service operator Signal International, Inc. and four affiliates, including Signal Ship Repair, LLC, Signal International, LLC, Signal International Texas GP, LLC and Signal International Texas, L.P. filed voluntary chapter 11 petitions in the United States Bankruptcy Court for the District of Delaware. The cases are docketed as case no. 15-11498, and have been assigned to The Honorable Mary F. Walrath.
The top 6 creditors listed with the petition are individuals who charged Signal with labor trafficing offenses and obtained judgments against the debtors earlier this year.
In the Declaration of Christopher S. Cunningham filed with the petitions, Mr. Cunningham says that the chapter 11 filings are the "consensual culmination of seven years of protracted and highly contentious multi-action litigation and negotation between Signal and certain of the Litigation Plaintiffs (defined in the Declaration) that has finally reached a global resolution and settlement embodied in the plan support agreement" (attached to the declaration).
Specifically, Mr. Cunningham notes that the plan support agreement contemplates an open market sale of Signal's assets, distribution of some $20-$22 million to the Litigation Plaintiffs from proceeds of a certain note (depending on loan performance), and a "gift payment" of $400,000 to be shared pro rata by holders of allowed general unsecured claims.
According to Mr. Cunningham, Signal has been saddled with significant litigation over the years. The most significant involves suits by various workers from India hired following Hurricane Katrina in 2005. Certain of those workers filed suit against Signal for alleged violations regarding treatment of the workers and quality of their working conditions. In the first of those actions to be tried (in 2015), a Louisana jury found in favor of 5 of the plaintiffs and against Signal in amounts exceeding $12 million. Signal also faced certain EEOC actions, which were stayed pending the outcome of various legal issues pending before the 5th Circuit in unrelated litigation. Other signficant insurance related litigation also resulted in rulings unfavorable to Signal.
The proposed plan support agreement, according to Mr. Cunningham, is the culmination of negotations to reach a global resolution of Signal's issues.