Dynamic Aerostructures LLC and its affiliates have filed a motion in Delaware bankruptcy court seeking to dismiss their Chapter 11 cases following the successful sale of substantially all their assets, arguing that dismissal is more cost-effective than conversion to Chapter 7 liquidation with no unencumbered assets remaining for unsecured creditors.
The aerospace components manufacturer, which filed for bankruptcy protection on February 26, 2025, sold its assets to FMI Holdco LLC in a transaction that closed on April 11, 2025. The sale was approved by the U.S. Bankruptcy Court for the District of Delaware on April 7.
"The Debtors have sold substantially all of their assets, and do not believe that there are any additional potential recoveries for unsecured creditors that would warrant keeping the Chapter 11 Cases open for further administration," Dynamic Aerostructures stated in its May 14 filing. "Under the circumstances, conversion to chapter 7 would impose additional administrative costs with no corresponding benefit to the Debtors' unsecured creditors or their estates."
The company noted that following the sale closing, it has approximately $2.6 million in a Professional Fee Reserve held exclusively for bankruptcy professionals, and $6.2 million in its operating account. The debtors proposed allocating the operating account funds first to any remaining U.S. Trustee fees and administrative claims, then setting aside $650,000 as a Wind-Down Reserve, with remaining amounts to be paid to the Prepetition Lender, FMI Holdco LLC.
According to court documents, FMI Holdco LLC had acquired 100% of BMO Harris Bank N.A.'s rights and interests in the company's prepetition credit facility on March 14, 2025, before later winning the auction as the stalking horse bidder. As of the petition date, the debtors owed not less than $54.7 million under the prepetition credit facility.
The motion outlines that "because all of the Debtors' cash constitutes encumbered 'cash collateral' or is otherwise held in trust exclusively for the benefit of professionals in the Professional Fee Reserve, the Debtors determined that dismissal would not negatively impact creditors (vis-à-vis conversion to chapter 7)."
The debtors also request that the court establish procedures for final fee applications by professionals, with a proposed deadline of June 27 for filing such applications and a final omnibus fee hearing on August 5. The motion further requests authorization to abandon or destroy books and records not acquired by the purchaser, approval to dissolve the debtor entities, and exculpation of certain parties involved in the bankruptcy cases.
Judge Laurie Selber Silverstein will consider the dismissal motion at a hearing scheduled for June 10, with objections due by June 3.
In explaining why dismissal is more appropriate than conversion to Chapter 7, the debtors cited multiple precedents from the Delaware bankruptcy court where similar relief was granted when debtors had no further business to reorganize and insufficient unencumbered assets to support administrative costs of continued bankruptcy proceedings.
The case has been jointly administered under case number 25-10292 before the U.S. Bankruptcy Court for the District of Delaware. The debtors are represented by Chipman Brown Cicero & Cole, LLP and Ropes & Gray LLP.
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