In re Orfa Corp. of Philadelphia
United States Bankruptcy Court for the Eastern District of Pennsylvania
129 B.R. 404 (1991)
Orfa Corporation of Philadelphia and related entities (Orfa) held valuable waste-management technology licenses but entered bankruptcy before ever completing a plant or turning a profit. Creditors EAFC and another investment-broker creditor (the Proponents) proposed a reorganization plan under which Orfa would seek bank financing and, failing that, the Proponents would arrange a private placement of preferred stock to raise the millions needed to pay debt and fund operations, with a new, more experienced management team running the reorganized company. Secured creditor SPNB, which had advanced over $14 million to Orfa without ever questioning its technology, along with unsecured creditor BEC and Orfa's technology licensors, objected that the plan wasn't feasible because it depended on raising capital from as-yet-unidentified investors.
Whether a plan of reorganization may be deemed feasible where the debtor, a possessor of highly useful technology aided by proven management and experienced investment professionals, must depend on a private placement of preferred stock with as-yet unknown investors to raise sufficient capital to pay off debt and run the business.