# In re Sabine Oil & Gas Corp.

> United States Bankruptcy Court, S.D. New York · March 31, 2016 · 547 B.R. 503

URL: https://www.frixlaw.com/law-library/cases/8499288

## Case

- **Full name:** IN RE: SABINE OIL & GAS CORPORATION, Debtors
- **Court:** United States Bankruptcy Court, S.D. New York
- **Decided:** March 31, 2016
- **Citations:** 547 B.R. 503; 2016 Bankr. LEXIS 1023; 2016 WL 1320279
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Chapman
- **Judges:** Chapman
- **Cited by:** 23 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/8499288

## Opinion text

BENCH DECISION ON MOTIONS FOR LEAVE, STANDING, AND AUTHORITY TO COMMENCE AND PROSECUTE CERTAIN CLAIMS AND CAUSES OF ACTION ON BEHALF OF THE DEBTORS’ ESTATES
2
SHELLEY C. CHAPMAN, UNITED STATES BANKRUPTCY JUDGE
Table of Contents
I. Applicable Standard... 514
II. Scope of Decision and Ruling... 519
III. Background... 520
IV. The STN Hearing... 530
V. Discussion... 537
A. Constructive Fraudulent Transfer Claims.. .537
*512 1. Constructive Fraudulent Transfer Claims to Be Asserted on behalf of Legacy Forest.. .537
2. Constructive Fraudulent Transfer Claims to Be Asserted on behalf of the Legacy Sabine Subsidiaries... 543
B. The Bad Acts Claims... 548
1. The Committee’s Alleged Theory of the Bad Acts Claims is Implausible and is Contradicted by the Record. . .549
2. The Intentional Fraudulent Transfer Claims are Not Color-able... 553
3. The Breach of Fiduciary Duty Claims are Not Colorable... 555
4. The Aiding and Abetting Breach of Fiduciary Duty Claims are Not Col-orable ...563
5. The Equitable Subordination Claims are Not Colorable... 564
6. The Recharacterization Claims are Not Colorable... 566
C. Conclusions with Respect to Col-orability.. .568
D. Consideration of the STN Best Interests Test... 568
1. Value of the Constructive Fraudulent Transfer Claims to be Asserted on Behalf of the Legacy Sabine Subsidiaries’ Estates... 568
2. Avoidance of Liens... 569
3. Recovery of New RBL Paydown, Merger and Financing Fees, and Prejudgment Interest...571
4. Diminution in Value of Liens Improperly Granted to the New RBL Lenders... 571
5. Cost-Benefit Analysis... 574
E. Methodology for Calculating Value of Adequate Protection Claims.. .574
VI. Conclusion... 578
Before the Court are the (i) Motion of the Official Committee of Unsecured Creditors for (I) Leave, Standing, and Authority to Commence and Prosecute Certain Claims and Causes of Action on Behalf of the Debtors’ Estates and (II) NonExclusive Settlement Authority, dated November 17, 2015 [ECF No. 518] (the “First Committee STN Motion”); (ii) Motion of the Forest Notes Indenture Trustees for Entry of an Order Pursuant to § 1109(b) Granting Leave, Standing and Authority to Prosecute and, if Appropriate, Settle Certain Claims on Behalf of the Estate of Sabine Oil & Gas Corporation, dated November 17, 2015 [ECF No. 521] (the “Forest Notes Indenture Trustees’ STN Motion”); and (in) Second Motion of the Official Committee of Unsecured Creditors for (I) Leave, Standing, and Authority to Commence and Prosecute Certain Claims and Causes of Action on Behalf of the Debtors’ Estates and (II) Non-Exclusive Settlement Authority, dated December 15, 2015 [ECF No. 609] (the “Second Committee STN Motion,” and, collectively with the First Committee STN Motion and the Forest Notes Indenture Trustees’ STN Motion, the “STN Motions”). The Official Committee of Unsecured Creditors (the “Committee”) and the indenture trustees for the Legacy Forest Notes (as defined herein) (the “Forest Notes Indenture Trustees”) shall be referred to herein collectively as the “Movants.”
Throughout these cases, the parties have grouped the claims that are the subject of the STN Motions into three categories. First, the First Committee STN Motion and the Forest Notes Indenture Trustees’ STN Motion each seeks standing to pursue constructive fraudulent conveyance claims against the Debtors’ current and former secured lenders arising from the December 2014 merger between For *513 est Oil Corporation (“Legacy Forest”) and Sabine Oil & Gas LLC (“Legacy Sabine Parent”) and related financing transactions (collectively, and with the merger, the “Combination”). 3 Specifically, these claims (the “Constructive Fraudulent Transfer Claims”) seek, on behalf of (i) the Legacy Forest estate and (ii) the estates of the subsidiaries of Legacy Sabine Parent (the “Legacy Sabine Subsidiaries”), to avoid obligations incurred, liens transferred, and payments made in connection with or related to the Combination.
Second, the Second Committee STN Motion seeks standing to pursue claims for (i) intentional fraudulent transfers related to the Combination; (ii) breaches of fiduciary duty against (a) the pre-Combination Legacy Forest directors and officers (the “Legacy Forest Directors and Officers”); (b) the Legacy Sabine Parent board of directors; (c) Mr. David J. Sambrooks, as fiduciary for the Legacy Sabine Subsidiaries; and (d) the members of the board of directors of the Combined Company who replaced the Legacy Forest board of directors at or around 1:20 p.m. EST on December 16, 2014 and met for the first time at 3:30 p.m. EST on December 16, 2014 (the “3:30 Board”); (iii) aiding and abetting breaches of fiduciary duty against the New RBL Lenders, 4 the Second Lien Lenders, 5 the Legacy Forest Directors and Officers, and the First Reserve Defendants (as defined below); (iv) equitable subordination of the claims of the New RBL Lenders and the Second Lien Lenders; and (v) recharacterization as equity of the $50 million borrowed from the Second Lien Lenders by the Combined Company in connection with the Combination (collectively, the “Bad Acts Claims”).
Finally, the First Committee STN Motion seeks standing to pursue certain claims unrelated to the Combination, including, among others, claims challenging certain liens as beyond the scope of the grant or as avoidable preferences (the “Bucket II Claims”). 6 The Bank of New *514 York Mellon Trust Company, N.A. (the “Legacy Sabine Notes Trustee”), as indenture trustee for the $850 million outstanding in 9.75% senior unsecured notes due 2017 (the “Legacy Sabine Notes”), has joined each of the STN Motions. 7 The Forest Notes Indenture Trustees joined the Second Committee STN Motion 8 and later amended the Forest Notes Indenture Trustees’ STN Motion to allow the Committee to seek a “lead” position with respect. to the Constructive Fraudulent Transfer Claims. 9 Accordingly, the Legacy Sabine Notes Trustee and the Forest Notes Indenture Trustees join the Committee as Movants in this proceeding.
Objections to one or all of the STN Motions were filed by the following parties, which the Court will refer to collectively as the “Objectors”: (i) Wells Fargo, in its capacity as New RBL Agent; 10 (ii) Barclays Bank PLC and Barclays Capital Inc.; 11 (iii) the Second Lien Agent; 12 (iv) the Debtors; 13 (v) the Ad Hoc Committee of Former Forest Employees; 14 (vi) FRC Founders Corporation, Sabine Investor Holdings LLC, First Reserve Fund XI, L.P., First Reserve GP XI, L.P., First Reserve GP XI, Inc., Michael G. France, Alex T. Krueger, Brooks M. Shughart, and Joshua Weiner (collectively, the “First Reserve Defendants”); 15 (vii) Sabine directors Duane Radtke, David J. Sam-brooks, and John Yearwood; 16 and (viii) Legacy Forest Directors and Officers Victor A. Wind, Loren K. Carroll, Richard J. Carty, Dod A. Fraser, James H. Lee, James D. Lightner, Patrick R. McDonald, and Raymond I. Wilcox. 17 On February 1, 2016, the Committee filed an omnibus reply to the objections to the .STN Motions, 18 which reply was joined by the Legacy Sabine Notes Trustee. 19
I. Applicable Standard
The Committee seeks to obtain derivative standing to prosecute the STN Motions pursuant to the holding in Unsecured Creditors Comm. of Debtor STN Enters. Inc. v. Noyes (In re STN Enterprises), 779 F.2d 901 (2d Cir.1985) (“STN”). In STN, the United States Court of Appeals for the Second Circuit recognized “an implied ... right for creditors’ committees to initiate adversary proceedings in the name of the debtor in possession[.]” 779 F.2d at 904 . In doing so, the Second Circuit agreed with the majority of bankruptcy courts that have “allowed creditors’ committees to initiate proceedings ... when the ... debtor in possession unjustifiably fail[s] to bring suit or abuse[s] its discretion in not suing. ...” 20 Id. To obtain derivative stand *515 ing under STN, a creditors’ committee typically must satisfy a two-part test. First, a committee presents colorable claims for relief “that on appropriate proof would support a recovery,” and second, a committee demonstrates that the “debtor unjustifiably failed to bring suit.” Id. at 905 .
The inquiry as to whether a claim is “colorable” under STN is similar to that undertaken by the court on a motion to dismiss. Adelphia Commc’ns Corp. v. Bank of Am., N.A. (In re Adelphia Commc’ns Corp.), 330 B.R. 364, 376 (Bankr.S.D.N.Y.2005); Official Comm. of Unsecured Creditors of Am.’s Hobby Ctr., Inc. v. Hudson United Bank (In re America’s Hobby Ctr., Inc.), 223 B.R. 275, 282 (Bankr.S.D.N.Y.1998); Official Comm. of Unsecured Creditors of the Debtors v. Austin Fin. Serv. (In re EDI Holdings, Inc.), 277 B.R. 493, 508 (Bankr.S.D.N.Y.1999) (citation omitted) (holding that, in deter mining whether there is a colorable claim, the court must engage in an inquiry that is “much the same as that undertaken when a defendant moves to dismiss a complaint for failure to state a claim”). Therefore, the movant must “state a claim [for] relief that is plausible on its face,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 , 127 S.Ct. 1955 , 167 L.Ed.2d 929 (2007), determination of which will be “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679 , 129 S.Ct. 1937 , 173 L.Ed.2d 868 (2009) (citation omitted).
While courts have commented that, under STN, the “required showing is a relatively easy one to make,” Adelphia, 330 B.R. at 375 , in determining whether to confer standing, the court may nevertheless “engagfe] in some review of disputed facts” to determine if there is “some factual support for the Committee’s allegations” and to determine that “the proposed litigation would be a sensible application of estate resources.” Id. at 369 . In making its determination, a court is not required to conduct a mini-trial or an evidentiary hearing, 21 and the court should make no factual findings on disputed issues of fact. Id. In Adelphia, after stating that the court “engaged in some review of disputed facts ... only to satisfy itself that there is some factual support for the Committees’ allegations without determining whether those allegations are true — and to satisfy itself that the proposed litigation would be a sensible application of estate resources,” Judge Gerber noted that he did so “perhaps in an excess of caution, as the language in STN suggests that factual review is not required.” Id.
The issue of standing is not designed to truncate the ability of creditors to get the benefit of full discovery if a lawsuit is viable, and authorization to bring claims derivatively “should be denied only if the claims are ‘facially defective.’ ” Adelphia, 330 B.R. at 376 (quoting America’s Hobby Ctr., 223 B.R. at 288 ). A determination that claims are colorable permits the issues to be decided in plenary *516 litigation, where the parties will need to prove their allegations and where the court can consider factual and legal claims and defenses on the merits. Id. at 381 . Notwithstanding, courts have observed that, consistent with the common meaning of “colorable,” the claims to be asserted should be “plausible” or “not without some merit.” Id,, at 376 (citations omitted). Courts have denied STN standard to pursue “apparently meritless claim[s]” or claims so flawed and “not subject to cure” that estate funds “ought not be squandered through continued litigation” of such claims. America’s Hobby Ctr., 223 B.R. at 288 .
If a committee presents a color-able claim or claims for relief that on appropriate proof would support a recovery, the bankruptcy court’s threshold inquiry has not concluded. STN, 779 F.2d at 905 . The second of the two prongs for determining whether a creditors’ committee can bring claims on behalf of a debtor’s estate is that the debtor itself must have unjustifiably refused to bring such claims. Id. at 904 . This inquiry does not require an improper motive for such failure, see Adelphia, 330 B.R. at 374 n. 19; and the creditor need not plead facts alleging the debtor’s reason or motive for inaction. See Canadian Pac. Forest Prods, v. J.D. Irving, Ltd. (In re Gibson Group), 66 F.3d 1436, 1439 (6th Cir.1995). Rather, the burden may be met through notice pleading by alleging the existence of an unpursued colorable claim that would benefit the estate. Thereafter, the burden shifts to the debtor, who is then obligated to show that its failure to act is justified. See id. at 1446 . “Where the debtor actively opposes a creditor’s request for leave to sue, the court must look at whether, beyond the fact that the debtor had no meaningful choice but to forego litigation, there is a substantial reason why interposition of the proposed suit would be harmful to the estate.” America’s Hobby Ctr., 223 B.R. at 283 (citation omitted).
“In order to decide whether the debtor unjustifiably failed to bring suit so as to give the creditors’ committee standing to bring an action, the court must also examine, on affidavit and other submission, by evidentiary hearing or otherwise, whether an action asserting such elaim(s) is likely to benefit the reorganization estate.” STN, 779 F.2d at 905 . The court should weigh the “probability of success and financial recovery,” as well as the anticipated costs of litigation, as part of a cost/benefit analysis to determine whether the prosecution of claims is likely to benefit the debtor’s estate. America’s Hobby Ctr., 223 B.R. at 282 . The court must assure itself (i) “that there is a sufficient likelihood of success to justify the anticipated delay and expense to the bankruptcy estate that initiation and continuation of litigation will likely produce,” Adelphia, 330 B.R. at 374 (quoting STN, 779 F.2d at 905-06 )); (ii) that the claims, if proven, will provide a basis for recovery; and (iii) that the proposed litigation will not be a “hopeless fling.” Adelphia, 330 B.R. at 386 .
The role of the court as gatekeeper is to protect the estate and to ensure that the proposed litigation “reasonably can be expected to be a sensible expenditure of estate resources ... [that] will not impair reorganization.” Id. Courts have denied standing where the proposed litigation would “delay resolution of [the] reorganization proceeding by impeding approval of the pending plan of reorganization.” Official Comm. Of Unsecured Creditors of Sunbeam Corp. v. Morgan Stanley & Co. (In re Sunbeam Corp.), 284 B.R. 355, 375 (Bankr.S.D.N.Y.2002) (denying standing to committee after finding that committee failed to demonstrate that prosecution of the actions would be “necessary and bene *517 ficial” to the resolution of the bankruptcy proceedings). “Requiring bankruptcy court approval conditioned upon the litigation’s effect on the estate helps prevent committees and individual creditors from pursuing adversary proceedings that may provide them with private benefits but result in a net loss to the entire estate.” In re Applied Theory Corp., 493 F.3d 82 , 86 (2d Cir.2007) (citation omitted). In evaluating requests for standing and whether proposed litigation is in the best interests of the estate, courts also consider other “common sense factors” such as (i) whether the deputization of the committee would permit the debtor to concentrate its resources on rehabilitating its business, (ii) whether the committee’s interests do not conflict with those of the estate, and (iii) whether the assignment would prejudice the equity of distribution amongst the debtor’s creditors. Adelphia, 330 B.R. at 375 .
The parties cite heavily to Adelphia, in which the court considered motions by the official committee of unsecured creditors and the official committee of equity security holders to prosecute claims on behalf of the debtors’ estates. Adelphia, 330 B.R. 364 . While the fact that the Adelphia debtors joined the creditors’ committee’s claims as co-plaintiffs positioned the court’s analysis more squarely under Glinka v. Murad (In re Housecraft Industries USA Inc.), 310 F.2d 64 (2d Cir.2002), in which the Second Circuit articulated the standard under which a bankruptcy court can confer standing upon a committee to sue as a co-plaintiff with the debtor on behalf of the estate, than solely under STN, the court provided extensive discussion of the STN standard, as described herein, which remains instructive. Adelphia, 330 B.R. at 373-386 . It bears noting, however, that the facts in Adelphia are otherwise distinguishable from the instant facts. In contrast to the instant case, neither of the committees’ standing motions in Adelphia was opposed by any party other than the defendants in the proposed litigation — in fact, the debtors stipulated to prosecuting the alleged claims as co-plaintiffs with the creditors’ committee, 'leading the court to stress that “[tjhose with an interest in maximizing the value of the estate — as contrasted to those with an interest in defeating the claims to be asserted here — do not seem to be troubled by the Committees’ proposed use of estate resources for the litigation the Committees wish to prosecute.” Id. at 368 . In addition to the fact that no non-defendant stakeholders were opposed to the assertion of the proposed claims, the court found that granting the committees standing to pursue the proposed actions, which (i) had the potential for “enormous” potential recoveries at a “relatively modest” cost of prosecution and (ii) set forth claims that will “easily withstand 12(b)(6) motions, and (to the extent the Court needs to consider this) have factual support,” was not only consistent with maximizing the value of the estate but “necessary to achieve that goal.” Id. at 384, 386 .
Here, the Committee argues that the proposed claims set forth in the complaints annexed to the STN Motions “are both meritorious and highly valuable, and actions prosecuting them would unquestionably benefit the Debtors’ estates.” 22 The Committee argues that the “best analogy for the current situation is what the bankruptcy court faced in Adelphia,” asserting that, during the “short time during which discovery has taken place,” the Committee has compiled enough evidence to survive a motion to dismiss each of the *518 proposed claims. 23 Therefore, the Mov-ants submit, the Committee should be granted standing to file its proposed complaints and pursue the full factual development that will occur in the actual lawsuit — to be provided with its opportunity to go beyond putting “some meat ... on the bones” and put forth “demonstrable proof’ at trial, proof sufficient to satisfy the ultimate burden of proof on the issue. 24 The Committee further argues that “[t]here has been no negotiation [with respect to the Debtors’ reorganization] because the Debtors concluded and publicly announced that the claims had zero merit,” but asserts that’ granting standing to the Committee will help shift leverage in that regard, as it “will foster an actual negotiation” — “the proper role of STN.” 25 Focusing on their ongoing assertion that the Debtors’ objective is to obtain plan releases for directors, officers, lenders, and First Reserve, the Movants submit that “granting STN authority ... would present a sizeable objection or obstacle to this attempt [to obtain plan releases].” 26
In sharp contrast to the Movants’ positions on colorability and on the purpose of STN standing in general, the Objectors contend that none of the Committee’s putative claims is colorable and that each of the proposed claims would warrant dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure. As Debtors’ counsel argued during closing arguments, the Committee has failed to satisfy its burden on colorability with respect to any of the claims — the undisputed facts demonstrate that no plausible inferences can be drawn in the Committee’s favor, and, in fact, the evidence presented during the ten days of trial on the STN Motions “doesn’t support but, in fact, undermines the Committee’s proposed claims.” 27 Moreover, even if certain of the proposed claims could be considered colorable, the Objectors submit that the Committee nevertheless should be denied standing because the pursuit of such claims is not justified where, as here, the costs heavily outweigh the benefits to the Debtors’ estates. They assert that the typical benefits found in other cases are not present here; namely, that the Committee is unlikely to prevail on the claims and, even assuming the claims are successful, the potential recoveries, if any, will result in an insignificant recovery to unsecured creditors given the existence of adequate protection claims. On the other hand, the costs to the Debtors’ estates are tremendous: expensive and protracted litigation — on meritless claims — that will deplete the Debtors’ remaining liquidity and undermine and delay the Debtors’ reorganization efforts. The Debtors argue that the standard under STN does not simply consider whether the estate can afford the proposed litigation but whether it is a “sensible” use of estate resources. 28 Here, they submit, the pro *519 posed litigation would impede the Debtors’ reorganization and erode value for all stakeholders.
Accordingly, applying the standard set forth in STN and its progeny, the Court finds that in order to grant standing to the Committee to pursue the proposed claims, it must conclude that the Committee has met its burden to demonstrate that each of the claims is colorable, that is,' plausible and not facially defective, and which, upon appropriate proof, would support a recovery. While the Court believes that the facts that are determinative here are largely not in dispute, a point made by both the Movants and the Objectors during the Hearing (as defined below), the Court recognizes that it may engage in some review of disputed facts in order to satisfy itself as to whether there exists factual support for the allegations put forth by the Committee. Assuming the Court finds one or more colorable claims has been asserted, its analysis will then shift to the second prong of the STN analysis to determine whether the Debtors unjustifiably refused to bring suit. Conscious of its role as gatekeeper, the Court must weigh the probability of success, the potential financial recovery, and the costs to the estates of the proposed litigation in examining whether the proposed litigation is likely to benefit the estates and will not impair the Debtors’ reorganization. The Court’s analysis follows.
II. Scope of Decision and Ruling
By agreement of the parties, the trial testimony and legal argument to this point have been focused primarily on the first prong of the STN test — whether the claims the Committee seeks standing to prosecute are in fact colorable claims. Accordingly, this decision shall reflect the Court’s ruling on the colorability of the Constructive Fraudulent Transfer Claims and the Bad Acts Claims. 29
With respect to colorability, the Court finds as follows:
• The Constructive Fraudulent Transfer Claims that could be asserted on behalf of the Legacy Forest estate are not colorable; 30
• The Constructive Fraudulent Transfer Claims that could be asserted on behalf of the estates of the Legacy Sabine Subsidiaries are colorable; and
• The Bad Acts Claims are not color-able.
The Court’s detailed analysis of the colora-bility of each category of claims follows. In addition, with respect to the second *520 prong of the STN test, 31 the Court will provide an explanation as to why it is not in the best interests of the estates to pursue the Constructive Fraudulent Transfer Claims that could be asserted on behalf of the estates of the Legacy Sabine Subsidiaries. Finally, the Court will set forth its determination as to the proper methodology for calculating the New RBL Lenders’ adequate protection claim, an issue that was sharply contested by the parties because of its bearing on the second prong of the STN test. 32
III. Background 33
Remarkably, despite the widely disparate legal positions of the Movants and the Objectors during fifteen days of trial, there is very little disagreement on the relevant facts. Each of the Constructive Fraudulent Transfer Claims and Bad Acts Claims is alleged to arise out of the Combination.
Prior to the Combination, Legacy Forest was a New York Stock Exchange-listed corporation, with its headquarters in Denver, Colorado; it held substantially all of its assets in that public corporation. At the time of the Combination, Legacy Forest had approximately $905 million of funded debt, consisting of (i) a reserve-based lending facility (the “Legacy Forest RBL”) with $105 million outstanding, secured by a first priority lien on, among other things, certain proved oil and gas reserves and (ii) approximately $800 million in unsecured notes: $578 million in 7.25% senior unsecured notes due 2019 (the “Legacy Forest 2019 Notes”) and $222 million in 7.5% senior unsecured notes due 2020 (the “Legacy Forest 2020 Notes” and, together with the Legacy Forest 2019 Notes, the “Legacy Forest Notes”). 34
Prior to the Combination, Legacy Sabine Parent was a portfolio company of the private equity firm First Reserve Corporation (“First Reserve”), with its headquarters in Houston, Texas. Legacy Sabine Parent was a holding company; the Legacy Sabine Subsidiaries held the bulk of the enterprise’s assets. Legacy Sabine Parent also had extensive debt obligations at the time of the Combination, including (i) a revolving credit agreement which had approximately $620 million outstanding (the “Legacy Sabine RBL”), (ii) $650 million in obligations outstanding under the Second Lien Credit Agreement (which obligations increased to $700 million at the time of the Combination) (the “Second Lien Loan”), and (iii) $350 million outstanding in Legacy Sabine Notes. Because the operating as *521 sets of the enterprise were held by the Legacy Sabine Subsidiaries, each of those subsidiaries guaranteed each of the Legacy Sabine RBL, the Second Lien Loan, and the Legacy Sabine Notes. In addition, the guarantees of the Legacy Sabine RBL and the Second Lien Loan were secured by liens on the assets of the Legacy Sabine Subsidiaries.
The genesis of the Combination can be traced to a December 2013 meeting between Patrick McDonald, the Chief Executive Officer of Legacy Forest, and John Yearwood, a director of Legacy Sabine Parent, followed by a meeting between Mr. McDonald and David Sambrooks, then the Chief Executive Officer of Legacy Sabine Parent. Talks between Legacy Forest and Legacy Sabine Parent progressed through the spring of 2014, culminating in the announcement of the Combination on May 5, 2014.
A. The Structure of the Combination as of May 5, 2014
On May 5, 2014, Legacy Forest entered into an Agreement and Plan of Merger with Legacy Sabine Parent and certain related entities (the “May Agreement and Plan of Merger”). The May Agreement and Plan of Merger provided for the combination of Legacy Forest and Legacy Sabine Parent through multiple steps, pursuant to which Legacy Forest would survive as a subsidiary of a newly formed holding company. Under this structure, Legacy Sabine Parent shareholders would own approximately 73.5% percent of the post-Combination company, while Legacy Forest shareholders would own approximately 26.5%. Because the corporate steps included a “downstream” merger of Legacy Forest into a subsidiary, New York Business Corporation Law required approval by two-thirds of the outstanding Legacy Forest shareholders entitled to vote. Legacy Forest and Legacy Sabine Parent announced that execution of the May Agreement and Plan of Merger would trigger the change-of-control provisions of the indentures governing the Legacy Forest Notes, and that, upon closing, the combined company would be required to make an offer to holders of the Legacy Forest Notes to redeem their notes at 101% of the outstanding principal amount, plus accrued interest.
Also on May 5, 2014, and in connection with the May Agreement and Plan of Merger, the post-Combination company obtained a commitment (the “May Commitment Letter”) from Barclays and Wells Fargo for two loans, with each of Barclays and Wells Fargo committing to funding fifty percent of each loan. The first was the New RBL, with an initial borrowing base of $1 billion,- the proceeds of which would be used, in part, to refinance the Legacy Sabine RBL and the Legacy For-, est RBL. The second was an unsecured bridge facility in the aggregate principal amount of up to $850 million (the “Bridge Loan”), which was to be used to provide sufficient funds to repurchase the Legacy Forest Notes under the change-of-control offer triggered by the structure of the May Agreement and Plan of Merger. The May Commitment Letter expired by its terms on November 1, 2014. 35
At Legacy Sabine Parent’s request, the May Commitment Letter was amended on May 19, 2014 to permit five additional financial institutions — Capital One N.A., Citibank, N.A., Bank of America N.A., Na-tixis New York Branch, and UBS AG *522 Stamford Branch — to each commit to and underwrite 10% of the aggregate commitments for the New RBL and the Bridge Loan. As a result, the respective commitments of Wells Fargo and Barclays on each of the New RBL and the Bridge Loan were reduced from 50% to 25%.
B. The Structure of the Combination is Revised in July 2014
In early June 2014, Legacy Forest and Legacy Sabine Parent learned that certain investors had embarked on a “shorting” strategy that could jeopardize the proposed Combination. Specifically, certain investment firms acquired “short” positions with respect to the Legacy Forest Notes. The investment firms had also begun buying Legacy Forest stock in order to vote against the Combination. If the investment firms could defeat the Combination, Legacy Forest would not be required to redeem the Legacy Forest Notes at 101%, benefiting the firms’ “short” positions.
In order to defeat the “shorts’ ” strategy, Legacy Forest and Legacy Sabine Parent restructured the May Agreement and Plan of Merger during the summer of 2014 to remove the initial Legacy Forest merger from the transaction steps so as to avoid the two-thirds shareholder approval threshold required under the May Agreement and Plan of Merger structure. The revised structure would require only majority approval of the Legacy Forest shareholders, which decreased the likelihood that the “shorts” seeking to block the Combination would succeed. On July 9, 2014, Legacy Forest, Legacy Sabine Parent, and related entities entered into an Amended and Restated Agreement and Plan of Merger (the “July Agreement and Plan of Merger”). Under the July Agreement and Plan of Merger, Legacy Sabine Parent would become a subsidiary of Legacy Forest and then would merge into Legacy Forest through a series of steps— meaning Legacy Forest would be the surviving company. The July structure still triggered the change-of-control provisions in the indentures governing the Legacy Forest Notes, requiring the combined company to make a 101% redemption offer to holders of the Legacy Forest Notes.
In connection with the new structure, Wells Fargo, Barclays, and the remaining New RBL Lenders entered into an Amended and Restated Commitment Letter (the “July Commitment Letter”) with financing terms similar to the May Commitment Letter, except that the commitment was extended to December 31, 2014 and the commitment fee was raised by 25 basis points. 36 Of particular relevance, the July Commitment Letter provided that (i) the New RBL would include a debt-to-EBITDA 37 ratio covenant for fourth quarter 2014 of 5.0x, decreasing to 4.75x for third quarter 2015 and 4.50x for first quarter 2016 (the “New RBL Debt-EBITDA Covenant”), ie., if the prospective combined company’s total debt was more than five times the amount of the prospective combined company’s EBITDA at the end of 2014, the prospective combined company would be in default on the New RBL and the New RBL Lenders would have the ability to accelerate all indebtedness outstanding; 38 and (ii) the total interest rate on the Bridge Loan was capped at 9.75%. 39
*523 C. Worsening Market and Financial Conditions Threaten the Combined Company’s Ability to Comply with the RBL Debt-EBITDA Covenant
Following the announcement of the July 2014 combination structure, each of Legacy Forest and Legacy Sabine Parent faced declining operating performance exacerbated by falling hydrocarbon prices. The declining operating performance threatened the prospective combined company’s projected ability at closing to comply with the New RBL Debt-EBITDA Covenant. Specifically, Legacy Sabine Parent’s financial model projected for the combined company a debt-to-EBITDA ratio of 5.11x for 4Q14 (when the ratio covenant would be 5.0x); 4.71x for 3Q15 (when the ratio covenant would be 4.75x); and 4.51x for 1Q16 (when the ratio covenant would be 4.5x). Mr. Sambrooks and Legacy Sabine Parent were unable to develop a model that projected a ratio level of less than 5.0x for 4Q14, 40 prompting Mr. Sambrooks on September 12, 2014 to write to the New RBL Lenders to request relief on the New RBL Debt-EBITDA Covenant. Thereafter, negotiations on the financing terms in the July Commitment Letter ensued.
D. Initial Renegotiation with the New RBL Lenders
The New RBL Lenders, who were also committed to funding the Bridge Loan, determined internally that they would offer the combined company relief on the New RBL Debt-EBITDA Covenant in exchange for modifying the terms of the Bridge Loan. Although the May and July combination structures had contemplated that the Bridge Loan would be replaced by a high-yield bond offering and would thus never fund, deterioration in the operating performance of Legacy Sabine Parent and Legacy Forest, combined with deteriorating conditions in the capital markets generally, made selling a high-yield bond offering challenging and thus increased the chances that the New RBL Lenders would in fact have to fund the Bridge Loan. 41 Accordingly, in exchange for offering relief on the New RBL Debt-EBITDA Covenant, the New RBL Lenders sought better terms on the Bridge Loan. 42
As of early November 2014, the New RBL Lenders had not formally responded to Mr. Sambrooks’ September 12, 2014 request. On November 5, 2014, Joshua Weiner, a First Reserve Managing Director who, along with Mr. Sambrooks, was leading negotiations on behalf of the post^Combination prospective combined company, remarked that “[n]ot getting to a deal [would be] almost mutually assured destruction.” 43
Finally, on November 7, 2014, the New RBL Lenders informed Messrs. Weiner and Sambrooks of their initial proposal. The New RBL Lenders proposed (i) an increase of the New RBL initial borrowing base to $1.1 billion, with the potential for a $150 million committed increase in the borrowing base at future redetermination *524 dates if such increases were supported by the combined company’s reserves; (ii) changing the New RBL Debt-EBITDA Covenant from a formula based on total leverage (ie., based on all funded debt) to a “First Lien Secured Leverage” ratio covenant that would measure debt-to-EBIT-DA only against the New RBL, thereby changing the New RBL DebiAEBITDA Covenant from a 5.0x ratio based on total debt, to a 2.5x ratio based on only first lien debt — a remarkable change resulting in the RBL Debt-EBITDA Covenant not being breached under any of Legacy Sabine Parent’s multiple rounds of projections (even projections produced shortly prior to closing); and (iii) changing the Bridge Loan from unsecured debt with the total interest rate capped at 9.75% to a third-lien loan with the total interest rate capped at 15.5%. 44
However, the New RBL Lenders’ proposal was not acceptable to the combined company in part because of concerns that the increased interest rate on the Bridge Loan would exacerbate the combined company’s liquidity issues. 45 Accordingly, negotiations with the New RBL Lenders continued through at least December 11, 2014. On the one hand, representatives of the prospective combined company, led by Mr. Weiner and Mr. Sambrooks, sought relief on the New RBL Debb-EBlTDA Covenant while preserving liquidity for the combined company and, on the other hand, the New RBL Lenders sought to obtain more favorable terms on the Bridge Loan. 46
E. Negotiations with the New RBL Lenders Appear to Break Down, Prompting Mr. Sambrooks to Seek a Termination of the Proposed Combination
At the end of November 2014, negotiations between the prospective combined company and the New RBL Lenders faltered, prompting both Mr. Sambrooks and the New RBL Lenders to consider the prospects for the prospective combined company if it were to close on the financing contemplated by the July Commitment Letter, ie., no relief on the New RBL Debt-EBITDA Covenant and an $850 million Bridge Loan at an interest rate capped at 9.75%. 47
Troubled by the specter of this scenario, Mr. Sambrooks called Mr. McDonald on November 30, 2014 and warned that “the financing for the combined companies [was] too expensive and [would] create an insolvency situation at closing” due to the projected breach of the New RBL Debt-EBITDA Covenant at the end of 2014. 48 Accordingly, Mr. Sambrooks presented four options to Mr. McDonald: (1) “[d]on’t merge,” (2) “[w]ork around the Change in Control provision of Forest bonds,” (3) “[d]elay deal for time sufficient for market and financing to be more favorable,” or (4) “[e]xchange only partial interests so as not to trigger Change in Control.” 49 Of these options, Mr. Sambrooks told Mr. McDonald that he would prefer terminating the Combination.
*525 Mr. McDonald addressed Mr. Sam-brooks’ concerns at a December 1, 2014 Legacy Forest board meeting. At the conclusion of that board meeting, the Legacy Forest board instructed Mr. McDonald to inform Mr. Sambrooks of Legacy Forest’s intention to close the Combination and to remind Mr. Sambrooks of Legacy Sabine Parent’s obligation, pursuant to the July Agreement and Plan of Merger, to close the Combination. The next day, on December 2, 2014, Mr. Sambrooks wrote a letter to the Legacy Forest board, again urging that Legacy Forest consent to a termination of the Combination. On December 5, 2014, the Legacy Forest board again met to consider Mr. Sambrooks’ letter and determined that pursuing the Combination remained in Legacy Forest’s best interests. On December 7, 2014, Mr. Sambrooks sent to Mr. McDonald updated financial models based on the terms of the secured Bridge Loan last discussed with the lenders and warned him of unmanageable debt levels at the combined company under such a scenario. Also on December 7, 2014, Mr. Sambrooks wrote another letter to Mr. McDonald, again urging termination of the Combination but this time urging Mr. McDonald and Legacy Forest to consider alternative structures, including a joint venture structure. That evening, the Legacy Forest board met again, after which Mr. McDonald wrote to Mr. Sambrooks reiterating Legacy Forest’s intention to close the Combination, but also agreeing to consider alternative solutions. 50
F. An Alternative Combination Structure Emerges
Well into early December 2014, the dynamics of the negotiations between the prospective combined company and the New RBL Lenders remained the same: the prospective combined company continued to seek relief on the New RBL Debt-EBITDA Covenant while preserving liquidity and the New RBL Lenders continued to seek better terms or reduction in exposure on the Bridge Loan in exchange for such relief. All parties recognized that leaving the Legacy Forest Notes in place, rather than replacing them with more expensive Bridge Loan financing, would both (i) directly increase the prospective combined company’s liquidity and capacity to service debt by freeing up cash that would otherwise be committed to interest payments on the Bridge Loan and (ii) simultaneously reduce the New RBL Lenders’ exposure, thereby making the New RBL Lenders more likely to grant covenant relief. Accordingly, the parties began to explore combination structures that would not trigger the change-of-control provisions of the Legacy Forest Notes, thus obviating the need to obtain the Bridge Loan to fund a repurchase of such Legacy Forest Notes. For example, on November 30, 2014, during his call with Mr. McDonald, Mr. Sambrooks listed as an option “[w]ork around the Change in Control provision of Forest bonds,” and “[ejxchange only partial interests so as not to trigger Change in Control.” 51
Similarly, on December 4, 2014, Mr. Scotto of Wells Fargo asked Mr. Weiner whether First Reserve had considered assigning some of its equity interests to a third-party, which would avoid a change-of-control and, consequently, avoid the need for the Bridge Loan to fund the payment of the Legacy Forest Notes. First Reserve rejected this proposal. 52 *526 During the week that followed, a number of structures were considered and negotiated, including structures without a Bridge Loan, but Mr. Scotto testified that Wells Fargo was not informed of the final structure of the Combination until December ll. 53
Ultimately, the final structure of the Combination originated in a December 3, 2014 conversation between Legacy Forest board member Dod Fraser and Legacy Forest’s legal counsel, Mark Gordon of Wachtell, Lipton, Rosen & Katz (“Wach-tell”). Over the course of their conversation, Mr. Fraser and Mr. Gordon developed a combination structure that they believed would avoid the change-of-control provisions of the Legacy Forest Notes by giving Legacy Forest shareholders 60% of the common voting power of the prospective combined company, subject to control rights held by First Reserve. 54 • Mr. Fraser testified that he did not receive any input from the New RBL Lenders in developing this structure. Notwithstanding this development, Mr. Fraser did not share this new structure with the Legacy Sabine Parent board until a December 9, 2014 conference call discussing alternative structures. Mr. Sambrooks deliberately chose to exclude the New RBL Lenders from this call. 55
During that December 9 conference call, the boards of Legacy Forest and Legacy Sabine Parent agreed to pursue Mr. Fraser’s alternative structure. On December 10, 2014, Mr. Sambrooks sent a term sheet to Mr. McDonald reflecting Mr. Fraser’s alternative structure and urged Mr. McDonald to provide comments as soon as possible so that he could “bring our banks over the wall.” 56 Mr. Sambrooks testified that he decided not to tell the New RBL Lenders about the potential alternative merger structure in order to ensure that they continued to work toward completion of a financing package under the July Commitment Letter in case agreement on an alternative structure could not be reached with Legacy Forest. 57
The next day, the boards of Legacy Forest and Legacy Sabine Parent agreed to modify the final structure for the Combination in accordance with Mr. Fraser’s proposal. On December 11, 2014, Legacy Sabine Parent sent the New RBL Lenders a term sheet reflecting Mr. Fraser’s proposed structure but did not commit to the prospective combined company closing under the revised structure. Instead, Legacy Sabine Parent asked the New RBL Lenders to both (i) provide financing terms based on the revised structure and (ii) continue negotiating modifications to the financing reflected in the July Commitment Letter, based on a structure that would include the Bridge Loan. The New RBL Lenders did as requested and negotiated on dual tracks. By the night of December 15, 2014, the New RBL Lenders had received internal credit approval to finance the structure based on Mr. Fraser’s proposal but did not yet know if the legacy companies would choose to close based on Mr. Fraser’s structure (without the Bridge Loan) or based on the July 2014 structure (with the Bridge Loan). 58
*527
G. The Final Combination Structure and Execution of the Combination
On December 16, 2014, the two legacy companies elected to close under Mr. Fraser’s proposed structure, thereby avoiding the change-of-control provisions of the Legacy Forest Notes and obviating the need to obtain the Bridge Loan to redeem the Legacy Forest Notes. Under this structure, the New RBL Lenders agreed to grant relief on the New RBL Debt-EBITDA Covenant and to delay a likely downward redetermination of the borrowing base from thirty days post-closing (ie., January 15, 2015) to April 1, 2015, ensuring that the prospective combined company would enjoy the liquidity benefits of an increased borrowing base for an additional two and a half months. In accordance with these revised (and subsequently finalized) terms, the Combination proceeded in three steps: a share exchange, a merger, and a debt financing, as described below.
Step 1: The Share Exchange
First, as authorized by their respective boards, Legacy Forest issued shares to Legacy Sabine Parent shareholders in exchange for the shares of Legacy Sabine Parent (the “Share Exchange”). The Share Exchange occurred at or around 12:40 p.m. EST on December 16, 2014. At the conclusion of the Share Exchange, Legacy Sabine Parent and, in turn, the Legacy Sabine Subsidiariés, were indirect subsidiaries of Legacy Forest.
Step 2: The Merger
The second step of the Combination was the merger of Legacy Sabine Parent into Legacy Forest (the “Merger”). The Merger, along with the Share Exchange, was contemplated by the documents that the Legacy Forest and Legacy Sabine Parent directors had executed on the morning of December 16, 2014. Following the Share Exchange, all but two of the Legacy Forest directors resigned and were replaced by the 3:30 Board. Notwithstanding the replacement of the Legacy Forest board with the 3:30 Board, no further board action was required to effectuate the Merger; the Merger would become effective upon each of the New York 59 and Delaware secretaries of state filing the relevant merger certificates. Nonetheless, when the 3:30 Board assumed its position, neither secretary of state had filed the relevant merger certificates and the Merger was not yet technically effective. Although the New York secretary of state filed the relevant merger certificates as of 2:09 p.m. EST, and the companies issued a press release announcing the closing of the Merger, the Delaware secretary of state did not file the relevant merger certificates until 3:48 p.m. EST. The 3:30 Board met from 3:30 p.m. EST through 3:45 p.m. EST, primarily to authorize and direct Legacy Forest to enter into the third step of the Combination, the Debt Financing (as defined below). Accordingly, although, as Mr. Sambrooks testified, the 3:30 Board believed that the Merger had closed prior to its 3:30 meet *528 ing, the Merger may not have been technically effective until after the conclusion of the 3:30 Board’s meeting. Upon the technical effectiveness of the Merger, pursuant to New York corporate law, Legacy Forest, as the successor to Legacy Sabine Parent, assumed the assets and the obligations of Legacy Sabine Parent, ie., the $620 million Legacy Sabine RBL, the $650 million Second Lien Loan, and the $350 million of Legacy Sabine Notes. In addition, Legacy Forest succeeded to Legacy Sabine Parent’s status as the sole member of the Legacy Sabine Subsidiaries.
Step 3: The Debt Financing
The third step of the Combination was the refinancing of the debt of Legacy Forest, which had by this point subsumed Legacy Sabine Parent. In accordance with the resolutions passed by the 3:30 Board, Legacy Forest, now the Combined Company, took the following steps (the “Debt Financing”):
• Incurred the $750 million New RBL;
• Used proceeds of the New RBL to pay off the Legacy Forest RBL and the Legacy Sabine RBL;
• Amended the Second Lien Loan to provide the Combined Company with an additional $50 million of availability and subsequent borrowing of such $50 million;
• Caused the Legacy Sabine Subsidiaries to issue guarantees to secure (i) the New RBL; (ii) the additional $50 million of borrowings on the Second Lien Loan; and (iii) the Legacy Forest Notes; and
• Granted liens to secure (i) the New RBL and the additional $50 million of borrowings on the Second Lien Loan and (ii) the guarantees thereof. 60
Following the completion of the Debt Financing, the Combination was complete.
On December 18, 2014, the Combined Company paid down approximately $206 million 61 of the amount outstanding under the New RBL. In late February 2015, the Combined Company drew down the $356 million of balance available on the New RBL.
H. The Debtors’ Investigation of the Constructive Fraudulent Transfer Claims and Bad Act Claims
On May 15, 2015, the Combined Company’s board of directors approved the formation of a special committee (the.“Independent Directors’ Committee”) to conduct an investigation of any potential claims and causes of action related to the Combination that the Debtors may possess against creditors and others. The Independent Directors’ Committee is comprised of two independent directors, Thomas Chewning and Jonathan Foster, neither of whom was involved in the Combination or had involvement with Legacy Sabine Parent or Legacy Forest at the time of the Combination. On June 10, 2015, the Combined Company’s board of directors approved an expansion of the Independent Directors’ Committee’s authority to decide which claims related to the Combination; if any, *529 the Combined Company should assert. 62 Mr. Chewning and Mr. Foster were assisted in their assessment of potential claims by the Independent Directors’ Committee’s legal and financial advisors. Initially, these advisors included litigation attorneys from Kirkland & Ellis LLP (“Kirkland”) and financial advisors from Zolfo Cooper. 63 The Independent Directors’ Committee later retained Professor Jack F. Williams, formerly of Mesirow Financial Consulting LLC and now of Baker Tilly, to provide additional expertise and perspective on the Debtors’ potential constructive fraudulent transfer claims. 64
Professor Williams produced an extensive report, dated October 26, 2015, analyzing potential constructive fraudulent transfer claims (the “Williams Report”). 65 In preparing his report, Professor Williams assumed that a constructive fraudulent transfer would exist where the transferring entity (i) was insolvent and (ii) received less than reasonably equivalent value in the exchange. 66 Professor Williams found that each of Legacy Forest, Legacy Sabine Parent, and the Legacy Sabine Subsidiaries was insolvent on the day of the Combination. 67 He then analyzed the issue of reasonably equivalent value “from the perspective of creditors” of 'each of Legacy Forest, Legacy Sabine Parent, and the Legacy Sabine Subsidiaries, i.e., whether discrete groups of creditors received reasonably equivalent value in the Combination. 68 Finally, in assessing reasonably equivalent value, Professor Williams declined to analyze any single step of the Combination in isolation and instead viewed the Combination as a whole. 69 Using this framework, he reached the following conclusions with respect to potential constructive fraudulent transfer claims, which conclusions were adopted by the Independent Directors’ Committee:
• Legacy Forest unsecured creditors’ recoveries were harmed by the Combination as a whole and thus they did not receive reasonably equivalent value; 70
• Legacy Sabine Parent and Legacy Sabine Subsidiary unsecured creditors’ recoveries were benefitted by the Combination as a whole and thus they received reasonably equivalent value; 71 and
• Legacy Forest unsecured creditors had no remedy “because it is not economically feasible presently to identify and trace [Legacy Forest] property, debt, and expenses that existed immediately before the [Combination] that remains property of the estate and because of the commingling of cash and cash equivalents and cross-debt obligations.” 72
Thereafter, on November 2, November 11, and November 14, 2015, the Independent Directors’ Committee received de *530 mand letters from the Committee and the Forest Notes Indenture Trustees with respect to the Constructive Fraudulent Transfer Claims and the Bad Acts Claims. On December 1, 2015, the Independent Directors’ Committee adopted a report prepared by Kirkland analyzing the Bad Acts Claims (the “December 1 Report”). The Independent Directors’ Committee adopted the report’s conclusion that there were no additional colorable claims that would benefit the estates. The Independent Directors’ Committee considered the claims raised in the demand letters received, and it continued to conclude that no additional claims were colorable and beneficial to the estates. 73
I. The Committee’s Investigation of the Constructive Fraudulent Transfer Claims and Bad Act Claims
On July 15, 2015 (the “Petition Date”), each of the Debtors filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. Shortly after its appointment, the Committee began its own investigation of the Constructive Fraudulent Transfer Claims and the Bad Acts Claims in parallel with the ongoing work of the Debtors’ Independent Directors’ Committee. Following initial discovery, and at the urging of the Court, the Committee and the Debtors entered into a coordinated discovery protocol stipulation that was so-ordered by the Court in September 2015 [ECF No. 357] (the “Discovery Protocol”). 74 Pursuant to the Discovery Protocol, the Committee received extensive access to documents and witnesses for deposition, albeit on a negotiated and voluntary, rather than unlimited, basis. So as to avoid duplication of efforts and costs, the Discovery Protocol stated that the Committee and the Debtors/Independent Directors’ Committee would work together to make document requests, conduct depositions, and otherwise investigate all potential claims, including the Constructive Fraudulent Transfer Claims and the Bad Acts Claims. In pursuing its investigation, the Committee had access to and reviewed over a million pages of documents, deposed seventeen witnesses, and billed over 9700 hours of time between August and December 2015. 75
IV. The STN Hearing
The hearing on the STN Motions (the “Hearing”) took place over the course of fifteen days, commencing on February 8, 2016 and with closing arguments concluding on March 17, 2016. It included nine days of live witness testimony from seven witnesses, over 400 exhibits submitted to the Court, five days of closing arguments, and closing argument demonstratives comprised of hundreds of slides.
The Court heard live testimony from the following seven witnesses: (i) Mr. Jonathan Foster, a member of the Independent Directors’ Committee of the Combined Company’s board of directors; (ii) Mr. David J. Sambrooks, the Chief Executive Officer of the Combined Company, the former Chief Executive Officer of Legacy Sabine, and a member of the Combined Company’s board of directors; (iii) Mr. Thomas Chewning, a member of the Independent Directors’ Committee of the Combined Company’s board of directors; (iv) Mr. Joshua Weiner, a Managing Director at First Reserve; (v) Mr. Steven M. Zelin, *531 a Managing Director at PJT Partners LP, financial advisor to the Committee; (vi) Mr. Jonathan Mitchell, Chief Restructuring Officer of the Debtors; and (vii) Professor Jack F. Williams, formerly of Mesi-row Financial Consulting LLC and now of Baker Tilly, retained by the Independent Directors’ Committee to provide additional expertise and perspective on the Debtors’ potential constructive fraudulent transfer claims.
The Court also viewed videotaped deposition testimony of the following five witnesses: (i) Mr. Dod A. Fraser, a member of the board of directors of Legacy Forest; (ii) Mr. Patrick R. McDonald, the Chief Executive Officer of Legacy Forest; (iii) Mr. Victor Wind, the former Chief Financial Officer of Legacy Forest; (iv) Mr. Kevin Scotto, an employee of Wells Fargo; and (v) Mr. Laurence Whittemore, an employee of JPMorgan Securities LLC, financial advisor to Legacy Forest.
The parties also submitted deposition designations and counter-designations of the deposition testimony of the following additional witnesses: (i) Mr. Loren K. Carroll, a member of the board of directors of Legacy Forest;' (ii) Mr. Richard J. Carty, a member of the board of directors of Legacy Forest; (iii) Mr. James H. Lee, a member of the board of directors of Legacy Forest; (iv) Mr. James D. Lightner, Chairman of the board of directors of Legacy Forest; (v) Mr. Raymond I. Wilcox, a member of the board of directors of Legacy Forest; (vi) Mr. Duane C. Radtke, Chairman of the Board of Legacy Sabine Parent; (vii) Mr. John Yearwood, a member of the board of directors of Legacy Sabine Parent; (viii) Mr. Michael G. France, a member of the board of directors of Legacy Sabine Parent and a Managing Director of First Reserve; (ix) Mr. Alex T. Krueger, a member of the board of directors of Legacy Sabine Parent and Co-Chief Executive Officer and President of First Reserve; and (x) Mr. Brooks M. Shughart, a member of the board of directors of Legacy Sabine Parent and a Director of First Reserve.
Witness testimony was particularly focused on the following issues: (i) the negotiation and decision-making process of the boards of directors and management teams of Legacy Sabine Parent and Legacy Forest with respect to the terms of the Combination between May 2014 and December 2014; (ii) the Debtors’ investigation of potential claims and causes of action that the Debtors or certain of their stakeholders may possess related to the Combination; and (iii) the Independent Directors’ Committee’s conclusions as to the colorability of those potential claims and causes of action.
A. Mr. Jonathan Foster
Mr. Foster, one of the two members of the Independent Directors’ Committee, gave extensive testimony regarding the process and analysis of potential claims and causes of action undertaken by the Independent Directors’ Committee. Mr. Foster joined the board of directors of the Combined Company on May 15, 2015 and was appointed to the Independent Directors’ Committee, along with Mr. Thomas Chewning, on the same day. Mr. Foster described the scope of the authorization given to the Independent Directors’ Committee to determine what claims, if any, the Company should pursue. He testified about the Independent Directors’ Committee’s authorizing Kirkland to prepare a complaint asserting a constructive fraudulent transfer claim seeking to avoid the liens associated with the Second Lien Loan’s deficiency at the time of the Combination, and the Independent Directors’ Committee’s direction *532 to Kirkland to continue its investigation into other potential causes of action.
While Mr. Foster was questioned extensively on the timing and the scope of third-party discovery conducted by the Independent Directors’ Committee with respect to potential causes of action, which discovery did not begin until the Independent Directors’ Committee had reviewed all of the Debtors’ documents, Mr. Foster offered a credible explanation for the Independent Directors’ Committee’s approach to third-party document discovery and review. He testified that the Independent Directors’ Committee understood that fraudulent transfer claims were “at the top of the list” of potential claims that creditors would likely want to pursue and that such claims are primarily economic-based and were more of an “analytical exercise” than other potential claims being considered by the Independent Directors’ Committee. 76 Accordingly, the Independent Directors’ Committee began its claims analysis there.
In addition to testifying in detail regarding the Independent Directors’ Committee’s process with respect to its analysis of potential claims, Mr. Foster also explained the Independent Directors’ Committee analysis and assessment of each of the potential claims identified by the Committee and his understanding of the possible remedies available. Mr. Foster’s testimony revealed a competent grasp of the multiple and complicated potential claims at issue.
B. Mr. David J. Sambrooks
Mr. Sambrooks is the former Chief Executive Officer and a director on the board of Legacy Sabine Parent, was a member of the 3:30 Board, and is the current Chief Executive Officer of the Combined Company. At the Hearing, he testified thoughtfully and credibly to the process and considerations of the Legacy Sabine board and management team with respect to the Combination and the issues leading up to it in December 2014. Mr. Sambrooks explained that although he initially thought a merger of Legacy Sabine Parent and Legacy Forest was a good fit, as of December 1, 2014, he had reached the conclusion that Legacy Sabine Parent should not enter into the Combination. Mr. Sambrooks described the reasons he requested covenant relief from Legacy Sabine’s lenders prior to the Combination, and why he thought it was important to seek to renegotiate the financing arrangements with the lenders.
Mr. Sambrooks testified that the revised structure under which the transaction closed was first discussed on a phone call between Legacy Forest and Legacy Sabine Parent management and board members with no lenders participating, and that the proposal originated with Legacy Forest. The new proposal — which eliminated the need for the Bridge Loan- — ■ addressed his concerns with the proposed transaction and so he supported the Combination under those terms. Nevertheless, Mr. Sambrooks testified that Legacy Sabine Parent requested that its lenders work on parallel tracks — toward being in a position to consummate the original financing structure and the revised structure. Ultimately, the final decision as to the financing terms was made by the boards of *533 Legacy Sabine Parent and Legacy Forest. Mr. Sambrooks also explained that First Reserve’s role was to assist the Legacy Sabine Parent management and board, but that First Reserve had no authority to control or bind the company.
Mr. Sambrooks testified that he attended the meeting of the 3:30 Board and that, as of that meeting, he viewed the Merger as completed; he was unaware that there was any opportunity to stop it without facing litigation. He further testified that he viewed the Debt Financing as a necessary and integrated step of the Combination to ensure the Combined Company would have liquidity to operate. He emphasized that he believed closing the Combination was the best alternative available to Legacy Sabine Parent at the time.
Mr. Sambrooks also testified that, from his perspective, Legacy Sabine Parent and the Legacy Sabine Subsidiaries operated as a single common enterprise prior and subsequent to the Combination.
C. Mr. Thomas Chewning
Mr. Chewning, a member of the board of the Combined Company as well as the second member of the Independent Directors’ Committee along with Mr. Foster, also testified as to the process and analysis of potential claims and causes of action undertaken by the Independent Directors’ Committee. Mr. Chewning described his vast experience in corporate finance, corporate governance, and the oil and gas industry. He explained the process of selecting Mr. Foster to join him as a member of the Independent Directors’ Committee and specifically testified that he chose Mr. Foster from the list of candidates provided to him based on Mr. Foster’s background.
Mr. Chewning understood the Independent Directors’ Committee members to have an “open mandate” to investigate the elements of the Combination for potential causes of action, 77 that it was their responsibility to have an “open mind” with respect to the Committee’s theories and what causes of action might be pursued, 78 and that their duties to investigate were ongoing even after the Debtors filed their complaint against the Second Lien Agent and Second Lien Lenders. Mr. Chewning also testified that while the Legacy Sabine Subsidiaries are legally separate from Legacy Sabine Parent, he always viewed them as a single enterprise based on how they operate.
Mr. Chewning explained how he was personally and actively involved in all aspects of the Independent Directors’ Committee’s investigation process, and he provided a credible explanation for why the Independent Directors’ Committee commenced its investigation with fraudulent conveyances and why it reached the conclusions that it did. Mr. Chewning’s testimony provided strong support for the good faith of the Independent Directors’ Committee in analyzing and assessing potential causes of action.
D. Mr. Joshua Weiner
Mr. Weiner is a Managing Director of First Reserve. He focuses on capital mar *534 kets transactions, including managing relationships with third-party capital providers. Mr. Weiner testified that he has been involved in prior financing transactions since the creation of NFR (the predecessor name of Legacy Sabine Parent) and was “heavily involved” in the negotiation of the financing structure for the Combination, working closely with Mr. Sambrooks. 79 Mr. Weiner described the contentious negotiations between Legacy Sabine Parent and the New RBL Lenders in December 2014 with respect to the terms of the New RBL and the Combined Company’s request for covenant relief. As he explained, given the absence of any “out” from the Combination, the Combined Company was facing a likely covenant breach upon closing under the terms of the July Commitment Letter. 80
Mr. Weiner further testified that, at all times, he undertook negotiations in the interests of the Combined Company, not in the interests of First Reserve or any other insider of Legacy Sabine Parent. Mr. Weiner also credibly testified that his role was to assist in the negotiation of the financing, and he did not try to and did not control Legacy Sabine Parent’s board or management team. He explained that, during the negotiations, he sought to be actively involved to prevent the lenders from attempting to manipulate management for the lenders’ own benefit and to ensure that the Combined Company main-tamed a good working relationship with its lenders as providers of liquidity going forward. He credibly testified that First Reserve’s business relationship with the New RBL Lenders was a secondary concern to the ability of the Combined Company to continue to access capital, and that he was doing what he believed was best for Legacy Sabine Parent to obtain the best financing package possible. Mr. Weiner was a forthright and credible witness.
E. Mr. Steven M. Zelin
Mr. Zelin is a Managing Director of PJT Partners LP, the financial advisor to the Committee. Mr. Zelin, who has decades of experience in major chapter 11 bankruptcies and out of court restructurings, was called to testify regarding his conclusions with respect to potential recoveries available from pursuit of the Committee’s proposed claims, as reflected more fully in his expert report (the “Zelin Report”). Mr. Zelin testified that he was given a series of assumptions from counsel to the Committee with respect to a number of “inputs,” 81 including assuming a one hundred percent chance of success on all of the Committee’s proposed claims, and that his methodology involved “unwinding” the Combination and evaluating each of the Legacy Forest and Legacy Sabine estates on a pre-Combination and post-Combination basis in order to conduct his analysis. 82
*535 As discussed in greater detail hereinafter, Mr. Zelin’s testimony was consistent with the conclusions set forth in the Zelin Report. Mr. Zelin testified that, under the assumptions he applied, the Constructive Fraudulent Transfer Claims would result in a recovery of $729 million to the unsecured creditors of Legacy Forest and $265 million to the unsecured creditors of the Legacy Sabine Subsidiaries. Mr. Zelin testified that he reached these conclusions by assuming a one hundred percent likelihood of success on the Constructive Fraudulent Transfer Claims and allocating the recoveries between the proforma Legacy Forest and Legacy Sabine Subsidiaries using additional assumptions. He also provided his estimate of the plaintiffs’ cost of litigating the entirety of the Constructive Fraudulent Transfer Claims in the amount of $20-30 million.
Mr. Zelin further testified to the methodology he utilized to calculate potential recoveries on the Bad Acts Claims in the amount of $1.17 to $1.19 billion; 83 he only viewed the Bad Acts Claims as a group and did not allocate potential damages and recoveries on a claim-by-claim basis. Mr. Zelin also described his methodology for calculating the value of the New RBL Lenders’ adequate protection claim in an amount between $0 and $50 million. In preparing his report, Mr. Zelin did not conduct a valuation of his own; rather, he relied on the valuation work done by Mr. Christopher Kearns of Berkeley Research Group (“BRG”) and on the asset values utilized by Professor Williams in the Williams Report.
While it is clear that Mr. Zelin faithfully applied the assumptions underlying his analysis and calculations, it was also readily apparent that he had been asked to use certain methodologies and assumptions that he had never used in other cases, nor had he ever seen them used by others. Criticisms of Mr. Zelin’s conclusions and report go not to his credibility and expertise but rather to the assumptions that he was asked to apply and model.
F. Mr. Jonathan Mitchell
After serving as an advisor to the Combined Company beginning in March 2015, Mr. Mitchell became the Chief Restructuring Officer of the Debtors on July 15, 2015. At the Hearing, Mr. Mitchell testified to his prior experience as a CRO or interim CEO for a number of other companies and to his prior work in the energy sector. Mr. Mitchell described the Debtors’ ongoing business activities and financial condition. He detailed his considerations in evaluating potential claims that the Debtors could assert, including (i) the Independent Directors’ Committee’s views as to the colorability of and potential recoveries on such claims and (ii) the size of the New RBL Lenders’ adequate protection claim. To determine the size of the adequate protection claim, Mr. Mitchell utilized the value of the subject collateral as of the Petition Date and then relied on recent valuation work performed by the Debtors’ financial advisor, Lazard Freres, to obtain a resulting adequate protection claim of approximately $480 million. Mr. Mitchell noted his disagreement with the methodology employed by the Committee’s expert, Mr. Zelin, for calculating the New RBL Lenders’ adequate protection claim.
*536 Mr. Mitchell also reinforced his understanding of his obligation to preserve value for the Debtors’ estates; it is his belief that the cost of litigation (which he estimates at approximately $30-$40 million), the low likelihood of success on the proposed claims, and the Debtors’ priority of preserving liquidity in order to emerge from bankruptcy further militate against any benefit in bringing the causes of action identified by the Committee. Mr. Mitchell also reconfirmed his view that a sale process would not be value-enhancing to the Debtors.
G. Professor Jack F. Williams
Professor Williams, formerly of Mesirow Financial Consulting LLC and now of Baker Tilly, was retained by the Independent Directors’ Committee to provide analysis and expertise as to potential constructive fraudulent transfer claims arising out of the Combination. Professor Williams was called to testify as an expert and fact witness as to the opinions set forth in the Williams Report, and as an expert witness to rebut the testimony of the Committee’s expert, Mr. Zelin.
Professor Williams’ testimony was consistent with the opinions reflected in the Williams Report. As described more fully hereinafter, Professor Williams testified to the numerous bases for his conclusion that Legacy Sabine Parent and the Legacy Sabine Subsidiaries functioned as a common enterprise from an economic perspective prior to the Combination, including the use of a centralized financing and cash management system. Professor Williams explained his conclusion that each of Legacy Forest, Legacy Sabine Parent, and the Legacy Sabine Subsidiaries was insolvent on the date of the Combination. Professor Williams walked through his methodology for determining what he described as the transfer of value to certain creditor constituencies as a result of the Combination. He explained that he assessed the impact of the Combination from a creditor perspective because while the constructive fraudulent transfer analysis focuses on what the Debtors received, he considers the creditors to be the component parts of the Debtors’ estates for the purpose of a fraudulent transfer analysis because the law is designed to protect unsecured creditors. He explained that he views the Combination as an integrated economic event that included the Merger and the Debt Financing. When asked how he determined whether a creditor group received “reasonably equivalent value,” Professor Williams testified that he assessed whether the value transferred and value received was “economically equivalent.” 84 Professor Williams acknowledged that he did not do a separate calculation of the value of the business synergies achieved by the Combination; he treated the liens granted to the Second Lien Lenders as part of the Combination transaction because this was a contractual obligation as of the Combination, but did not include the undrawn amount of the New RBL because the Debtors had no obligation to incur that additional debt.
Most importantly, upon questioning by Debtors’ counsel, Professor Williams provided persuasive testimony rebutting the methodology and conclusions of Mr. Zelin. Professor Williams explained his belief that Mr. Zelin’s calculations relied on a “double-counting” of the New RBL obli *537 gation and the corresponding liens, and that absent such “double-counting,” there would be no value left for unsecured creditors to recover from encumbered assets of the Debtors’ estates. 85
V. Discussion
A. Constructive Fraudulent Transfer Claims
The Court now turns to its analysis of each of the Constructive Fraudulent Transfer Claims to determine if any of these claims is colorable. Under applicable statutory and case law, including sections 544 and 548 of the Bankruptcy Code, a constructive fraudulent transfer generally occurs when (i) the debtor receives less than reasonably equivalent value in exchange for the property transferred or obligation incurred and (ii) the transfer of property or incurrence of debt occurs when the debtor is insolvent. See Orr v. Kinderhill Corp., 991 F.2d 31, 35-36 (2d Cir.1993).
Each of the Constructive Fraudulent Transfer Claims the Committee proposes to assert on behalf of Legacy Forest and the Legacy Sabine Subsidiaries arises from transfers made or obligations incurred in connection with the Combination. The Movants and the Objectors agree on the basic facts of the Combination; additionally, there is no dispute that Legacy Forest and the Legacy Sabine Subsidiaries were balance sheet insolvent at the time of the Combination. The Movants and the Objectors alike cite to Second Circuit precedent in Orr and HBE Leasing Corp. v. Frank, 48 F.3d 623 (2d Cir.1995), which directs the Court to consider, for purposes of fraudulent transfer analysis, multiple transactions that occur pursuant to an integrated plan as a whoM — the so-called “collapsing doctrine.” Nonetheless, the parties have a fundamental threshold dispute as to exactly how the Court should analyze the various transfers and incur-rences incident to the Combination for purposes of fraudulent transfer law, and specifically how and when the Court should apply the collapsing doctrine. This threshold dispute largely drives the parties’ disagreement on whether the Constructive Fraudulent Transfer Claims, which the Committee values at more than $1 billion in the aggregate, assuming complete success on such claims, are colorable.
1. Constructive Fraudulent Transfer Claims to Be Asserted on behalf of Legacy Forest
a. The Committee’s Theory 86
The theory of the Committee’s Constructive Fraudulent Transfer Claims as to Legacy Forest involves two steps and is dependent on the Court adopting a segmented view of the .Combination. The Committee’s theory has been referred to from time to time in this proceeding as a “freeze frame” or “snapshot” approach. First, the Committee argues that the result of the Merger was that Legacy Forest (i) incurred a.total of $1.26 billion in obli *538 gations of Legacy Sabine Parent (i.e., the Legacy Sabine RBL, the Second Lien Loan, and the Legacy Sabine Notes) and (ii) received only the negligible assets of Legacy Sabine Parent in return — far less than reasonably equivalent value for the incurrence of $1.26 billion in debt. 87 Therefore, says the Committee, the Merger effected a constructive fraudulent transfer as to Legacy Forest and, thus, each of the Legacy Sabine RBL, the Second Lien Loan, and the Legacy Sabine Notes are avoidable obligations of Legacy Forest. In an indication that the focus of this STN proceeding is more about shifting recoveries from secured creditors to unsecured creditors than protecting the Debtors’ estates, the Committee, however, does not seek standing to challenge the incurrence of the Legacy Sabine Notes, even though such notes are avoidable obligations under the Committee’s theory. 88
Next, the Committee asserts that the collapsing doctrine referred to in Orr v. Kinderhill Corp., 991 F.2d 31 (2d Cir.1993), and HBE Leasing Corp. v. Frank, 48 F.3d 623, 635 (2d Cir.1995), should apply to Legacy Forest’s incurrence of portions of the New RBL, resulting in a fraudulent transfer claim here as well. Specifically, the Committee contends that the Court should collapse Legacy Forest’s (i) incurrence of the New RBL and (ii) use of $620 million of the New RBL proceeds to pay off the Legacy Sabine RBL because “[t]here is no question that the paydown of the Legacy Sabine RBL was to be, and could only have been, accomplished through the [New RBL].” 89 In the Committee’s view, such application collapses these two transactions into a single transaction in which Legacy Forest used $620 million of the New RBL proceeds to pay an avoidable obligation, the Legacy Sabine RBL. Thus, contends the Committee, “viewing the transaction as a whole,” Legacy Forest received no value for the incur-rence of the portion of the New RBL that was used to pay off the Legacy Sabine RBL, making the incurrence of the New RBL itself an avoidable transfer and the New RBL an avoidable obligation. 90
The proposed Constructive Fraudulent Transfer Claims seek a number of remedies as recompense to the creditors of the Legacy Forest estate for the allegedly fraudulent transfers described above, including (i) avoidance of liens granted to secure the allegedly avoidable obligations, including liens on the equity interests of the Legacy Sabine Subsidiaries; (ii) recovery of the diminution in value of such avoidable liens since the Combination; (iii) recovery of the December 18, 2014 $206 million paydown of the New RBL, and prejudgment interest on the same; and (iv) recovery of fees paid in connection with the Combination, and prejudgment interest on the same. The Committee’s financial expert, Mr. Zelin, estimates that complete success on these Constructive *539 Fraudulent Transfer Claims would result in an additional $729 million of value available to the unsecured creditors of Legacy Forest, as follows: 91
• Avoidance of Liens Improperly Granted to Secure Avoidable Obligations — $111 million
• Recovery of New RBL Paydown— $159 million
• Merger & Financing Fees — $13 million
• Prejudgment Interest — $24 million
• Diminution in Value of Improperly Granted Liens to Secure Avoidable Obligations — $422 million
• Total — $729 million
During his testimony, Mr. Zelin conceded that if the Court finds that the New RBL is not an avoidable obligation at Legacy Forest, the vast majority, if not all, of the above amounts would not be recoverable. 92
Accordingly, recovery of these amounts is dependent upon the Court adopting a segmented view of the Combination and finding that (i) Legacy Forest did not receive reasonably equivalent value in the Merger, rendering the Legacy Sabine RBL an avoidable obligation, which conclusion indeed requires adopting a “freeze-frame” analysis, and (ii) the incurrence of the New RBL and the paydown of the “avoidable” Legacy Sabine RBL are collapsed into a single transaction such that the New RBL, save for $182 million used to pay down the valid Legacy Forest RBL obligations, is itself an avoidable obligation.
b. The Objectors’ Theories
Each of the Objectors contends that the Constructive Fraudulent Transfer Claims that the Committee argues can be asserted by Legacy Forest are not colorable. The Debtors and the New RBL Lenders argue persuasively that the Committee’s argument rests on a false premise, namely that Legacy Forest’s incurrence of the Legacy Sabine RBL in the Merger can be analyzed separate and apart from the entire Combination for purposes of fraudulent transfer law. The New RBL Lenders, citing to Liquidation Trust of Hechinger Inv. Co. v. Fleet Retail Fin. Grp. (In re Hechinger Inv. Co. of Del.), 327 B.R. 537 (D.Del.2005), assert that the entirety of the Combination, i.e., the Share Exchange, Merger, and Debt Financing, should be viewed as a single transaction. 93 Similarly, the Debtors and the Second Lien Agent observe that the Committee’s theory cannot be correct as a matter of law because it essentially provides a “magic wand” which transforms valid obligations into avoidable obligations upon the borrower merging into another entity and failing to provide reasonably equivalent value. 94 In addition, as argued by Debtors’ counsel during closing argument (echoing the views of Professor Williams), the math tracks the analytics inasmuch as the Legacy Sabine RBL went into the Combination fully secured and contributing its underlying collateral and cannot, as a result of the Merger, be rendered an avoidable obli *540 gation. 95
Accordingly, as a threshold issue, the Court must determine whether the Committee’s theory that the Merger and the incurrence of the New RBL should be analyzed separately from the entire Combination is tenable. If the Merger must instead be analyzed with the Share Exchange and Debt Financing as part of a single transaction, the Committee’s claims to avoid the New RBL obligation (based on the theory that Legacy Forest did not receive reasonably equivalent value when it incurred the Legacy Sabine RBL in connection with the Merger) are not color-able.
c. The Merger Must Be Analyzed as One Part of a Single, Integrated Transaction — The Combination
The Committee’s constructive fraudulent transfer theory requires the Court to apply the collapsing doctrine to find that (a) the Merger is not collapsible into a single transaction with the Share Exchange and the Debt Financing and therefore Legacy Forest’s incurrence of the Legacy Sabine RBL is a fraudulent transfer and (b) Legacy Forest’s incurrence of $620 million of the New RBL and the paydown of the $620 million Legacy Sabine RBL are collapsible into a single transaction. The Committee contends that this selective application of the collapsing doctrine is appropriate because, in its view, the application of the collapsing doctrine is limited to consideration of whether a transfer was made or an obligation incurred for reasonably equivalent value. In other words, the Committee’s view of the collapsing doctrine is that (i) the Court can analyze any one transfer related to the Combination, including Legacy Forest’s incurrence of Legacy Sabine Parent’s debt through the Merger, in isolation from other possibly related transfers and (ii) the Court may collapse value received or value given in related transactions for purposes of determining whether the transferee received reasonably equivalent value in connection with a transfer.
The Court declines to adopt the Committee’s view of the collapsing doctrine. While the collapsing doctrine seems to be employed most often in the context of assessing reasonably equivalent value, counsel for the Committee, when questioned by the Court, was unable to point to any case limiting its application to that context. Further, the Committee’s theory is at odds with the Second Circuit’s articulation of the collapsing doctrine. In Orr v. Kinderhill Corp., the Second Circuit held “[w]here a transfer is only a step in a general plan, the plan must be viewed as a whole with all its composite implications.” 96 Notably this language refers to all composite implications, not just implications for assessing reasonably equivalent value. In fact, Judge Gropper in Tronox Inc. v. Kerr McGee Corp. (In re Tronox Inc.), 503 B.R. 239 (Bankr.S.D.N.Y.2013), citing to Orr v. Kinderhill Corp., recently applied the collapsing doctrine to assess whether a claim to avoid a fraudulent transfer was timely brought, an application outside the context of assessing reasonably equivalent value. See id. at 267 (“[i]n any event, the law is clear that for statute of limitations purposes fraudulent conveyances are examined for their substance, not their form.”). Accordingly, the Court concludes that the better view is that a proper application of the collapsing doctrine, as articulated by the Second Circuit, requires collapsing all transfers that are part of a single plan and viewing that *541 single plan as a whole, with all its composite implications, for reasonably equivalent value and otherwise.
In determining whether to treat a transfer as part of a general plan, courts in this District and elsewhere have focused on the knowledge and intent of the parties. 97 In the recent decision of Adelphia Recovery Trust v. FPL Group, Inc. (In re Adelphia Commc’ns Corp.), 512 B.R. 447, 491 (Bankr.S.D.N.Y.2014), Judge Gerber identified three factors to consider in such analysis:
a. Whether all of the parties involved had knowledge of the multiple transactions;
b. Whether each transaction would have occurred on its own; and
c. Whether each transaction was dependent or conditioned on other transactions.
Applying these factors here, it is clear that the Merger, along with the Share Exchange and the Debt Financing, must be treated as parts of a general plan, and that the Combination must be analyzed as a whole for purposes of fraudulent transfer law. First, as the Committee itself alleges, the parties negotiated with full knowledge that the Combination would occur as a share exchange and merger of the two companies and a simultaneous refinancing; the Committee’s view of the facts was confirmed by each of the testifying witnesses who were involved with the structuring and negotiation of the Combination and no contradictory evidence was introduced at the Hearing. Indeed, the facts as alleged by the Committee clearly demonstrate that the M & A structure and consideration were negotiated contemporaneously with the financing and that negotiations on one piece of the Combination informed and influenced negotiations on the other pieces of the Combination. For example, the parties’ concerns that, amid declining hydrocarbon prices, the post-Combination company would close into a breach of the New RBL Debt-EBITDA Covenant drove both renegotiation of the May 2014 and July 2014 financing terms and a reconsideration of the post-Combination capital structure that directly led to the final Combination structure and terms implemented at closing in December 2014. 98
The facts alleged by the Committee further demonstrate that each step of the Combination was dependent upon and contingent on each other step and could not have happened on its own. The Debt Financing was always dependent upon and contingent on Legacy Forest and Legacy Sabine Parent becoming the “Combined Company” referenced in the resolutions of the 3:30 Board approving the Debt Financing. 99 Similarly, contemporaneous with completion of the Share Exchange, the documents that would effect the Merger *542 were on their way to the New York and Delaware secretaries of state. Finally, and contrary to the Committee’s unsubstantiated contention, there is nothing in the facts pleaded by the Committee (or in the record developed at the Hearing) suggesting that the Combination could somehow have been stopped or have been reversed after the Share Exchange and/or Merger. Mr. Sambrooks, who was intimately involved in every aspect of the Combination and served on the 3:30 Board, testified that leaving Legacy Forest and Legacy Sabine Parent to function with separate capital structures was never considered; he expressed doubt over whether such an arrangement would have been feasible both as a matter of operational efficiency and as a matter of remaining in compliance with the debt covenants of each of Legacy Forest and Legacy Sabine Parent. 100 Simply put, the Committee’s characterization of the possible reversal of the Share Exchange and Merger as a “simple paper transaction” is simplistic and implausible.
Accordingly, the Court finds that the Combination must be viewed as a whole for purposes of fraudulent transfer law. This conclusion is further buttressed by the Williams Report, which regards the Combination as an integrated event from an economic perspective. 101 Neither the Zelin Report nor Mr. Zelin’s testimony challenged Professor Williams’ conclusion that, from an economic perspective, the Combination was an integrated event. 102
d. The Constructive Fraudulent Transfer Claims to Be Asserted on behalf of Legacy Forest Are Not Colorable
Having concluded that the Combination must be evaluated as a whole, the Court next turns to the question of whether the Committee has stated colorable constructive fraudulent transfer claims on behalf of Legacy Forest. It has not. As already discussed, the Committee’s claims are premised on the notion that the Court will apply a selective collapsing analysis and (i) view the Merger in a “freeze frame,” as an occurrence separate from the Combination as a whole, to find fraudulent incurrenees of Legacy Sabine debt by the Legacy Forest estate, and (ii) collapse the incurrence of the New RBL and the use of the New RBL proceeds to pay off the allegedly avoidable Legacy Sabine RBL, rendering $620 million of the New RBL proceeds a fraudulent incurrence of debt. Such a selective collapsing approach is inconsistent with the law in this Circuit and elsewhere, which directs the Court to consider as a whole all transaction steps that are part of an integrated plan. Without application of the Committee’s selective collapsing approach, the Constructive *543 Fraudulent Transfer Claims to be asserted on behalf of Legacy Forest fail.
The Court concurs with the observations of the New RBL Lenders that the case most analogous to the instant case is He-chinger, 103 in which, as here, a new secured credit facility was used to provide financing to the post-merger entity, which used proceeds of the financing to pay a pre-merger creditor. The New RBL Lenders maintain that “[w]hen viewed correctly, the New RBL Lenders indisputably provided value in the form of a new money, oversecured RBL Facility to the Combined [Company] at the time of the closing of the Combination.” 104
It has been suggested, however, that it defies common sense to conclude that the Movants have alleged no colorable claim to right the wrongs to Legacy Forest unsecured creditors, particularly given that Professor Williams himself identified, in the words of counsel to the Legacy Sabine Notes Trustee, an “acknowledged harm” flowing from the Combination. 105 Specifically, Professor Williams’ analysis concludes that recoveries to Legacy Forest unsecured creditors fell from 60.9% pre-Combination to 36.7% post-Combination. 106 But, as the Movants have repeatedly confirmed when queried by the Court, the Committee is not interested in pursuing a cause of action that could compensate the Legacy Forest unsecured creditors for this alleged harm. In any event, the Debtors have filed an adversary proceeding in this Court seeking to, in effect, recover this amount on behalf of the Legacy Forest unsecured creditors by challenging certain liens granted to the Second Lien Lenders in the Combination; there is thus no need for the Court to address STN standing for the Committee on such claim.
2. Constructive Fraudulent Transfer Claims to Be Asserted on behalf of the Legacy Sabine Subsidiaries
a. The Committee’s Theory
Unlike the Constructive Fraudulent Transfer Claims the Committee seeks to assert on behalf of the Legacy Forest estate, the Constructive Fraudulent Transfer Claims to be asserted on behalf of the Legacy Sabine Subsidiaries’ estates do not require the Court to view any step of the Combination apart from the whole. As described in the First Committee STN Motion, the Constructive Fraudulent Transfer Claims that the Committee seeks to pursue on behalf of the Legacy Sabine Subsidiaries’ estates are relatively straightforward: the avoidance of the “upstream” guarantees and, as applicable, related liens granted by the Legacy Sabine Subsidiaries, in connection with (i) the New RBL in amounts greater than the Legacy Sabine RBL at the time of the Combination and (ii) the incremental $50 million obligation incurred under the Second Lien Loan in connection with the Combination. 107 The Committee’s theory for ayoidance of the guarantees is also straightforward: as a result of the Combination, the Legacy Sabine Subsidiaries guaranteed an additional $980 million in debt comprised of (a) the additional $130 million of borrowings on the New RBL as compared to the Legacy Sabine RBL; (b) the incremental $50 million incurred under the Second Lien Loan; and (c) the $800 million of Legacy Forest Notes, and the Legacy Sabine Subsidiaries granted liens *544 on assets to secure the incremental borrowings on the New RBL and the Second Lien Loan. In the Committee’s view, the Legacy Sabine Subsidiaries received no value in return for the guarantees issued and liens granted to secure such guarantees. 108 Notably, the Committee does not seek standing to challenge the Legacy Sabine Subsidiaries’ guarantees of the Legacy Forest Notes, even though such guarantees would be avoidable obligations under the Committee’s theory.
The Committee’s expert, Mr. Zelin, did not perform a separate valuation of the Constructive Fraudulent Transfer Claims to be asserted on behalf of the Legacy Sabine Subsidiaries. Instead, he assumed complete success on each and every Constructive Fraudulent Transfer Claim proposed to be asserted by the Committee (ie., those to be asserted on behalf of Legacy Forest and on behalf of the Legacy Sabine Subsidiaries), and he allocated the recoveries from such claims between Legacy Forest and the Legacy Sabine Subsidiaries using additional assumptions. Applying these assumptions, Mr. Zelin estimated that complete success on the Constructive Fraudulent Transfer Claims would result in an additional $265 million of value available to unsecured creditors of the Legacy Sabine Subsidiaries, as follows:
• Avoidance of Liens Improperly Granted to Secure Guarantees — $68 million
• Recovery o'f New RBL Paydown— $47 million
• Merger & Financing Fees — $20 million
• Prejudgment Interest — $9 million
• Diminution in Value of Liens Improperly Granted to Secure Guarantees — $121 million
• Total — $265 million
As discussed in further detail below, the assumptions supplied by Committee counsel to Mr. Zelin are deeply flawed. They do not take into account the possibility that some of the assumed recoveries allocated to Legacy Sabine Subsidiaries are based on payments actually made by Legacy Forest, not by the Legacy Sabine Subsidiaries. 109 In addition, if the Constructive Fraudulent Transfer Claims to be asserted on behalf of Legacy Forest are not colorable and the Court declines to recognize, as a matter of law, any claim for the diminution in value of liens allegedly improperly granted, then only the first category identified by Mr. Zelin-— Avoidance of Liens Improperly Granted to Secure Guarantees — reflects value hypothetically available to the estates of the Legacy Sabine Subsidiaries on account of the Constructive Fraudulent Transfer Claims.
The bottom line is that the only remedy potentially available to the Legacy Sabine Subsidiaries if their Constructive Fraudulent Transfer Claims are successful would be the avoidance of liens actually granted to secure the incremental borrowings on the New RBL and the Second Lien Loan. The maximum value of these claims is $68 million, reflecting Mr. Zelin’s assumptions as to the value of the assets pledged.to secure the incremental borrowings. Further, and as described hereinafter, the Ze- *545 lin Report does not disclose which liens he assumes would be avoided to yield that $68 million figure. That omission is especially glaring in light of testimony and documentary evidence that the Legacy Sabine Subsidiaries did not grant any new liens to secure the incremental borrowings on the New RBL and Second Lien Loan. Thus, while the maximum recoverable amount on the Constructive Fraudulent Transfer Claims asserted by the Legacy Sabine Subsidiaries is, per Mr. Zelin, $68 million, such amount is limited to the value of the actual liens granted by the Legacy Sabine Subsidiaries. The facts alleged, and the record thus far, suggest that such value would be closer to $0 than to $68 million, without any consideration of litigation costs.
b. The Constructive Fraudulent Transfer Claims to Be Asserted on behalf of the Legacy Sabine Subsidiaries Are Colorable
The Objectors concede that the Legacy Sabine Subsidiaries were insolvent when they granted the upstream guarantees. However, they advance three theories as to why the Legacy Sabine Subsidiaries received reasonably equivalent value for the upstream guarantees. None of the Objectors’ theories is dispositive of the issue of colorability, however. First, the Debtors, supported by the Williams Report, argue that the Legacy Sabine Subsidiaries received reasonably equivalent value because Legacy Sabine unsecured creditors’ recoveries increased from 30.7% prior to the Combination to 36.7% following the Combination. 110 While the Debtors are correct that fraudulent transfer law is designed to protect creditors, the Debtors’ theory ignores the text of section 548 of the Bankruptcy Code, which states that a transfer is avoidable “if the debtor ... received less than reasonably equivalent value in exchange for such transfer or obligation.” 11 U.S.C. § 548 (c) (emphasis added). Delaware and Texas state law, which could potentially be applied through section 544(b)(1) of the Bankruptcy Code, 111 similarly refer to the debtor’s receipt of reasonably equivalent value in the transfer, not whether creditors were harmed by the transfer. 112 Thus, the relevant question is whether the Legacy Sabine Subsidiaries’ estates received reasonably equivalent value for the upstream guarantees extended in connection with the Combination, not whether, as the Debtors would have it, any class of Legacy Sabine creditors was harmed as a result of the Combination.
Second, the New RBL Lenders argue that the Legacy Sabine Subsidiaries received reasonably equivalent value for the upstream guarantees in the form of contingent contribution and subrogation rights. The New RBL Lenders contend that such rights constitute reasonably equivalent value as a matter of law “[b]ecause there was more collateral than obligations outstanding under the [RBL], any Debtor subsidiary guarantor had the right to recover an amount from any other co-obligor that would be greater than the amount for which it could be liable.” 113 The value of *546 these rights, and whether such value constitutes reasonably equivalent value, is a question of fact which the Court cannot address in the context of an STN motion.
Third, the Debtors and the New RBL Lenders argue that the Legacy Sabine Subsidiaries could not function independently and therefore the reasonably equivalent value analysis must include the benefits the Legacy Sabine Subsidiaries received as members of a single enterprise, including the benefits of increased liquidity and access to additional borrowings. The Debtors, joined by the New RBL Lenders, argue that, because the Legacy Sabine Subsidiaries are members of a single enterprise, they shared dollar for dollar in any value or benefits received by Legacy Sabine Parent before the Combination and Legacy Forest/the Combined Company following the Combination. The Debtors and the New RBL Lenders further contend that, because Legacy Forest received reasonably equivalent value in the Combination, the Court should find that such reasonably equivalent value was also received by the Legacy Sabine Subsidiaries as members of a single enterprise, without the need to perform a specific reasonably equivalent value analysis with respect to the amount of indirect benefits received by the Legacy Sabine Subsidiaries.
The record developed at the Hearing, including the undisputed facts that the Legacy Sabine Subsidiaries do not have employees or enter into contracts, among others, strongly indicates that the Legacy Sabine Subsidiaries and Legacy Sabine Parent, and post-Combination, the Legacy Sabine Subsidiaries and Legacy Forest, functioned as a single enterprise. 114 Nevertheless, at this stage of the proceedings, the Court cannot make a determination as a matter of law that the Debtors are á single enterprise. But, even assuming the existence of a single enterprise, the Court cannot accept the argument of the Debtors and the New RBL Lenders that such a conclusion obviates the need to conduct a reasonably equivalent value analysis with respect to the amount of indirect benefits received by the Legacy Sabine Subsidiaries.
In support of their argument, the Debtors and New RBL Lenders rely principally on Tronox Inc. v. Kerr McGee Corp. (In re Tronox Inc.), 503 B.R. 239 (Bankr.S.D.N.Y.2013), and PSN Liquidating Trust v. Intelsat Corp. (In re PSN USA, Inc.), 2011 WL 4031147 (Bankr.S.D.Fla. Sept. 9, 2011). Neither case stands for the proposition asserted. In Tronox, Judge Gropper considered an alleged intentional fraudulent transfer in which a conglomerate spun off its oil and gas business, leaving behind its chemical business and the substantial liabilities associated with such business, through (i) a series of integrated transfers of the assets of the oil and gas entity into a new enterprise and transfers of the assets comprising the chemical business and cash into three separate Tronox entities and (ii) an IPO of such Tronox entities. Each of the Tronox entities sued to avoid the transfers and the IPO as an intentional fraudulent conveyance aimed at allowing the conglomerate to shed its legacy liabilities associated with the chemical business. One of the Tronox entities, Tro-nox LLC, received property that the parties in the case agreed was worth more than the property it had transferred out, *547 prompting the defendants to argue that Tronox LLC had received reasonably equivalent value, notwithstanding that, as a whole, the three Tronox entities had transferred out, in total, more than $17 billion in assets and received only $2.6 billion in assets in return. Judge Gropper held that, because, in substance, creditors looked to the three Tronox entities on a consolidated basis as responsible for the legacy liabilities, the Tronox plaintiffs were able to satisfy their burden of proof that Tronox LLC had not received reasonably equivalent value in the transfers by demonstrating that the three Tronox entities on a consolidated basis had not received reasonably equivalent value. See 503 B.R. at 294-95 .
In PSN, the debtor, which operated a television network, made market rate payments for satellite services necessary to operate such network pursuant to a contract entered into by its parent company. The liquidating trust of the debtor’s estate argued that such payments constituted constructive fraudulent transfers because, pursuant to the contract at issue, the satellite services were “owned” by the parent company and thus provided no value to the debtor. The Court held that, because the debtor actually used the satellite services, it received reasonably equivalent value in exchange for its payments on the contract. PSN, 2011 WL 4031147 at *4. In addition, and in response to the liquidating trust’s argument that only the debtor’s parent benefitted from the satellite services contract because the debtor did not “own” the contract, the court held that “the relationship between the Debtor and [parent] was that of a single enterprise. Accordingly, even if the Court were to conclude that [parent] received the benefit of the satellite services, the Debtor indirectly benefit-ted as well. These indirect benefits to the Debtor constitute reasonably equivalent value and shield the Transfers from avoidance.” Id. at *6 . While Tronox and PSN are instances in which courts did not need to consider reasonably equivalent value on an estate-by-estate basis within a single enterprise, it is the specific facts of those cases, not the findings that the estates operated as members of a single enterprise, which obviated the need for an estate-by-estate analysis.
In re Jesup & Lamont, Inc., 507 B.R. 452, 471-72 (Bankr.S.D.N.Y.2014), which Judge Gropper decided subsequent to Tro-nox and involved facts somewhat more analogous to the facts here, is particularly instructive. In that case, a wholly-owned subsidiary, JLSC, pledged funds to secure a loan obligation incurred by its parent company, JLI, and such pledge was challenged as a fraudulent transfer. Judge Gropper held that there was a triable issue of fact as to whether JLSC, the subsidiary, had received benefits from the loan sufficient to constitute reasonably equivalent value for the pledge of its assets to secure such loan. See id. at 472 .
The Committee asserts in its reply brief that the question of whether indirect benefits, whether received by entities as members of a single enterprise or otherwise, can constitute reasonably equivalent value for a guarantee is a question of fact that cannot be determined at this stage of the proceedings. 115 The Court agrees.’ While the Legacy Sabine Subsidiaries may have *548 received substantial indirect benefits from the Combination as members of a single enterprise, and such benefits must be considered when assessing reasonably equivalent value, the value of the indirect benefits (and any contingent contribution and subrogation rights), and whether such indirect benefits provide reasonably equivalent value for the guarantees the Legacy Sabine Subsidiaries issued in connection with the Combination, raises a question of fact. 116
Accordingly, the Constructive Fraudulent Transfer Claims the Committee seeks to assert on behalf of the Legacy Sabine Subsidiaries clear the hurdle of colorability. It is undisputed that the Legacy Sabine Subsidiaries, while insolvent, guaranteed an additional $980 million in debt in connection with the Combination. Further development of the factual record would be required for the Court to determine whether the Legacy Sabine Subsidiaries received reasonably equivalent value in exchange for such guarantees and the liens that were granted to secure them. However, for the reasons discussed below, it does not appear that asserting such claims (which, as discussed below, would be worth $68 million in value at most) would be in the best interests of the estates.
B. The Bad Acts Claims
As described above, the Bad Acts Claims consist of claims for (i) intentional fraudulent transfers related to the Combination; (ii) breaches of fiduciary duty against (a) the Legacy Forest Directors and Officers, (b) the Legacy Sabine board of directors, (c) Mr. David J. Sambrooks, as fiduciary for the Legacy Sabine Subsidiaries, and (d) the 3:30 Board; (iii) aiding and abetting breaches of fiduciary duty against the New RBL Lenders, the Legacy Forest Directors and Officers, the Second Lien Lenders, and the First Reserve Defendants; (iv) equitable subordination of the claims of the New RBL Lenders and the Second Lien Lenders; and (v) rechar-acterization as equity of the $50 million borrowed from the Second Lien Lenders by the Combined Company in connection with the Combination. 117 At the direction of counsel to the Committee, Mr. Zelin assumed that damages from the entirety of the Bad Acts Claims would be equal to the difference between “what recoveries to unsecured creditors would have been at the time of the Combination” and what recoveries to unsecured creditors are under the Debtors’ proposed plan of reorganization. 118 Using that flawed assumption, Mr. Zelin estimates that, if the Committee succeeds on the Bad Acts Claims, recoveries to unsecured creditors would be approximately $1.17 to $1.19 billion, inclusive of prejudgment interest. 119 The Zelin Report does not allocate potential damages and recoveries on a claim-by-claim basis. 120 Because the Court finds that none of the Bad Acts Claims is colorable as a matter of law, however, the failure to perform such allocation is immaterial, as are the myriad other flaws in the Committee’s damage calculation assumptions.
*549 1. The Committee’s Alleged Theory of the Bad Acts Claims is Implausible and is Contradicted by the Record
Each of the Committee’s proposed Bad Acts Claims arises from allegations concerning the conduct of various parties during the negotiation and execution of the Combination. The Committee’s assertion that such claims are colorable is animated by the Committee’s narrative of the Combination, stated succinctly in the Second Committee STN Motion as follows:
Two struggling companies decided to combine, when prices were high. Prices declined, and they should have called off their planned transaction. Instead, the parties with a long-standing relationship — an equity holder that faced recognizing losses (First Reserve) and banks facing immediate losses on their loan commitments (Wells Fargo, Barclays and other banks) — undertook a transaction that preserved and enhanced their own interests at the expense of unsecured creditors. 121
More specifically, the Committee asserts that First Reserve and the New RBL Lenders, notably Wells Fargo and Bar-clays, re-engineered the Combination in December 2014 to shift losses to unsecured creditors that the New RBL Lenders would have suffered from closing on the Bridge Loan, thereby allowing First Reserve to delay recognizing a loss on its investment in Legacy Sabine Parent and to preserve First Reserve’s institutional relationship with the New RBL Lenders. 122 Then, alleges the Committee, First Reserve and the New RBL Lenders, using First Reserve’s effective control over the Legacy Sabine Parent board and the 3:30 Board and with the help of certain of the Legacy Forest Directors and Officers and Mr. Sambrooks, were able to ensure that each of the Legacy Forest board, the Legacy Sabine Parent board, and the 3:30 Board would execute the re-engineered Combination, notwithstanding that doing so constituted a breach of each board’s fiduciary duties. Indeed, the entire focus of counsel for the Forest Notes Indenture Trustees during closing arguments was the theory that, in the days before the Combination closed, the New RBL Lenders knowingly shifted to the holders of the Legacy Forest Notes the risks that the lenders had previously assumed. 123 The Committee’s narrative, however, is not only at odds with common sense but is overwhelmingly contradicted by the voluminous record established thus far in this proceeding. Simply put, the Committee’s theory is implausible and the claims premised upon it are not colorable.
First, the parties agree that the final structure and steps of the Combination were first presented by Legacy Forest board member Dod Fraser on December 9, 2014. 124 Mr. Fraser testified that he developed the modified structure on December 3, 2014, with input from Mr. Gor *550 don of Wachtell. 125 Mr. Fraser further testified that, while he was aware of the contentious relationship between the New RBL Lenders and Legacy Sabine Parent/First Reserve with respect to funding the Combination and the New RBL Lenders’ desire not to fund the Bridge Loan, 126 he and Mr. Gordon devised the structure without input from Legacy Sabine Parent, First Reserve, or the New RBL Lenders. 127 In fact, Mr. Fraser did not share the final structure with Legacy Sabine Parent until December 9, 2014. 128
Further, although structures similar to the final structure and steps of the Combination (ie., structures in which the New RBL Lenders did not fund the Bridge Loan and the Legacy Forest Notes remained in place) were discussed prior to December 9, 2014, 129 there is nothing indicating that First Reserve or the New RBL Lenders were the driving force behind the final structure of the Combination. To the contrary, the testimony elicited at the Hearing indicates that Legacy Sabine Parent deliberately excluded the New RBL Lenders from discussions of a Combination structure that did not include the Bridge Loan in order to ensure that the lenders focused on revising the terms of the New RBL and Bridge Loan and being prepared to close under the original structure. Indeed, the record indicates that, even as of December 9, 2014, after Mr. Fraser had introduced the final Combination structure and steps to Legacy Sabine Parent, the New RBL Lenders were continuing negotiation on financing under the original structure including the Bridge Loan. 130
Second, there is no reasonable basis for the Committee’s allegations that the New RBL Lenders and First Reserve were conspiratorially working together to protect the New RBL Lenders’ interests at the expense of Legacy Forest and Legacy Sabine unsecured creditors. The Committee attempts to substantiate its allegations by pointing to a November 5, 2014 e-mail from First Reserve Managing Director Joshua Weiner in which Mr. Weiner remarked that “[n]ot getting to a deal [would *551 be] almost mutually assured destruction.” 131 The Committee infers from this e-mail that the referenced “mutually assured destruction” is that of the New RBL Lenders and First Reserve if the Combination closed with the inclusion of the Bridge Loan and that First Reserve and the New RBL Lenders were working together to avoid this outcome. Placed into its proper context, however, Mr. Weiner’s remark tells a very different story. As the Committee acknowledges, the “deal” to which Mr. Weiner referred was his request, on behalf of the prospective combined company, for covenant relief on the planned New RBL. 132 As the Committee concedes, the request was necessitated by declining operating performance at both Legacy Forest and Legacy Sabine Parent that resulted in projections indicating that the Combined Company would be in breach of its New RBL Debt-to-EBITDA Covenant by year-end 2014; to avoid that breach, Legacy Sabine Parent requested a modification of the New RBL Debt-to-EBITDA Covenant. 133 Thus, the “mutually assured destruction” to which Mr. Weiner referred was that of the New RBL Lenders and the Combined Company, each of whom would be faced with difficult scenarios if the New RBL Debt-to-EBITDA Covenant were breached.
In response to the request for covenant relief, Wells Fargo and Barclays, the lead New RBL Lenders and the lenders committed to funding the Bridge Loan, indicated to Mr. Weiner that they would grant the requested covenant relief but would require modifications to the Bridge Loan in return. 134 What followed, as meticulously detailed in the Second Committee STN Motion and as recounted by Mr. Weiner during his testimony, were weeks of negotiations to revise the terms of the New RBL to provide the Combined Company with covenant relief while providing the lenders with a higher, rate of interest and/or more security on their Bridge Loan commitment. 135 These negotiations were contentious and demonstrate that the New RBL Lenders on the one hand, and First Reserve, on the other, had assumed an adversarial posture and were not working together to protect the New RBL Lenders’ interests.
Third, the Committee has provided no reasonable basis for its assertion that First Reserve, in the person of Mr. Weiner, negotiated at any point or in any way against the Combined Company’s interests. The Committee primarily relies - on two e-mails from Mr. Weiner to portray First Reserve as (i) controlling Legacy Sabine Parent’s capital markets decisions related to the Combination, regardless of the position of Legacy Sabine Parent’s management or board and (ii) using such control to protect the New RBL Lenders and, in particular, Barclays and Wells Fargo. The first such e-mail, sent by Mr. Weiner to a First Reserve colleague, states “I don’t care what mgmt says— anything cap markets relates [sic] needs to be approved by me and [it] is their job to make sure i am in the loop[.]” 136 The Committee contends that this e-mail establishes that “[Mr.] Weiner exercised full control over capital markets decisions re *552 lated to the Combination, regardless of the positions taken by Legacy Sabine Parent’s management.” 137 In the second e-mail, sent on November 7, 2014, 138 Mr. Weiner observes that it was better to handle the' transaction “as a deal with the banks vs. flame them,” because the “[i]dea of flaming them” made him “really nervous.” According to Mr. Weiner, “flaming” the banks “[w]ould be really bad for future biz.” The Committee contends this e-mail shows Mr. Weiner being “particularly vocal about the need to maintain First Reserve’s relationships with the banks.” 139
Mr. Weiner’s testimony at the Hearing credibly contradicts the Committee’s speculative interpretation of both e-mails and, further, forcefully debunks the Committee’s baseless conspiracy theory. With respect to the first e-mail, Mr. Weiner explained, while “[ultimately, it’s the board and management that control the decision-making,” his role at First Reserve is to assist portfolio companies’ management teams in negotiating capital markets and financing terms, a role that requires him to be apprised of negotiations between lenders and portfolio companies. Mr. Weiner clarified that he sent the first email to a colleague in response to a report that Barclays and Wells Fargo were attempting to meet with Mr. Sambrooks “because I felt like the banks were trying to convince management to do something silly — was that they need to keep me in the loop so I can stop this kind of stuff from happening.” 140 With respect to the second e-mail, Mr. Weiner testified that “flaming” Wells Fargo and Barclays by forcing them to close on the- Bridge Loan would have been bad for the future business of the Combined Company because Barclays and Wells Fargo were “Sabine’s core relationships and the providers of liquidity directly to Sabine.” 141 By contrast, Mr. Weiner testified that neither Wells Fargo nor Bar-clays was a “top five” relationship for First Reserve. 142
Perfectly illustrating the fallacy of the Committee’s narrative that the New RBL Lenders and First Reserve were working together to protect each other’s interests is the fact that First Reserve and Legacy Sabine Parent, negotiating on behalf of the prospective combined company, turned down the New RBL Lenders’ November 7, 2014 proposal, which called for (i) replacing the New RBL Debt-to-EBITDA Covenant with an “easy-to-meet” first lien debt-to-EBITDA covenant and (ii) increasing the total interest rate cap on the Bridge Loan from 9.75% to 15.5%. 143 This proposal would have protected the alleged interests of both the New RBL Lenders, who of course had made the proposal, and First Reserve, in that the

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/8499288. Public record. Not legal advice.