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One of New Manchester's creditors was the International
Nederlanden Bank N.V. (NMB). The foregoing debt was secured by
and undertaken in connection with the acquisition of Old
Manchester's assets. Since New Manchester had encountered
economic and financial difficulties, NMB sought to assist the
steel company to effectuate a sale of its assets. In that
regard, the value of NMB's collateral had significantly
decreased. Subsequently, New Manchester failed to make interest
payments due on or after September 20, 1991.
On March 3, 1992, an involuntary petition for bankruptcy was
filed, on the behalf of New Manchester, under chapter 7 of the
U.S. Bankruptcy Code.4 The bankruptcy case was administered in
the U.S. Bankruptcy Court for the Northern District of Ohio. NMB
was the senior secured lender in the aforementioned proceeding.
On March 11, 1992, the bankruptcy court granted a motion for
an order conditioning the use, sale, or lease of New Manchester's
property on NMB's interests being protected. Next, on March 26,
1992, the bankruptcy court entered an order for relief. It
stated that, since the statutory threshold had been satisfied:
"an order for relief is hereby entered thereon. The Debtor is
4A ch. 7 proceeding is, essentially, a liquidation.
Conversely, a ch. 11 case is a proceeding for the reorganization
of the debtor, and the idea is for the debtor to emerge from the
case as an operating entity with a different capital structure.
See Spiotto & Acker, A Bankruptcy and Insolvency Primer: Overview
of the Reorganization Process (1997).
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