CTN Holdings, Inc. and its affiliated debtors have filed a motion to convert their bankruptcy cases from Chapter 11 to Chapter 7 liquidation following the recent 363 sale of substantially all their assets. The Delaware bankruptcy court will consider the motion at a hearing scheduled for August 4.
The motion, filed on July 11 in the United States Bankruptcy Court for the District of Delaware, comes after the June 17 closing of a sale to Catona Solutions, LLC. According to court documents, the debtors "no longer have sufficient resources to fund a continuation of the Chapter 11 Cases, and there is no reasonable likelihood that the Debtors can confirm and consummate a chapter 11 plan with the available funding."
"Having consummated this sale, the Debtors now move this Court to convert the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code," the filing states, noting that conversion is both the debtors' legal right and explicitly required under a settlement agreement previously approved by the court.
The eight affiliated debtors, which include CTN Holdings, Inc., CTN SPV Holdings, LLC, Make Earth Green Again, LLC and other entities, initially filed for Chapter 11 protection on March 30, 2025, with an additional entity joining the bankruptcy proceedings in May. The cases have been jointly administered under Case No. 25-10603.
A key component of the conversion motion is the approval of a Transition Services Agreement (TSA) between the debtors and Catona Solutions. The TSA is designed to ensure continued cooperation between the buyer and the debtors' bankruptcy estates, facilitating both the post-closing business transition and the future Chapter 7 trustee's administration of certain "Retained Assets" that were excluded from the sale.
"In advance of the Closing, the Buyer and the Debtors negotiated the TSA in good faith, at arm's length and for the administrative purposes of facilitating the transfer of the Debtors' assets and going concern to the Buyer as well as ensuring that the Debtors will retain access to the books, records, and other information," the filing explains.
The conversion motion also establishes detailed procedures for the transition, including deadlines for professionals to file final fee applications, the turnover of books and records to the future trustee, and reporting requirements. Notably, the motion seeks to maintain the Official Committee of Unsecured Creditors until a permanent Chapter 7 trustee is appointed.
The conversion follows a previously approved Settlement Agreement between the debtors, their DIP lender Inherent Aspiration, LLC, and the Official Committee of Unsecured Creditors. That agreement specifically required conversion to Chapter 7 following the sale closing, with the future Chapter 7 trustee tasked with administering certain causes of action and other assets that were excluded from the sale "for the benefit of creditors."
According to the motion, the debtor-in-possession financing that funded the Chapter 11 cases only extended through the closing of the asset sale, leaving the debtors without resources to continue operating in Chapter 11.
The filing comes after what appears to be a successful asset sale process that "preserved the Debtors' going concern, certain of the Debtors' key relationships with customers, vendors, and project partners, and the jobs of certain of the Debtors' employees."
Whiteford, Taylor & Preston LLC is representing the debtors in the bankruptcy proceedings. Objections to the conversion motion are due by July 25, 2025.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 15 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.