Brown Rudnick Reaches Settlement in Sinker-Maker’s Bankruptcy Case

Brown Rudnick successfully negotiated on behalf of the Official Committee of Unsecured Creditors a comprehensive settlement agreement in the Chapter 11 bankruptcy of Water Gremlin, a manufacturer of battery terminals and fishing sinkers.

Brown Rudnick reached the settlement on Sept. 11 between the creditors of Water Gremlin and other bankrupt subsidiaries of Okabe, a public Japanese industrial manufacturing company.

Terms of the settlement include the distribution of $27.9 million to creditors through a consensual settlement. Okabe and other settling parties would receive a release of estate claims and a consensual release of direct claims. U.S. Bankruptcy Judge Craig T. Goldblatt mediated the matter in Delaware. U.S. Bankruptcy Judge Laurie Selber Silverstein will be asked to approve the settlement in the coming months.

Water Gremlin filed for Chapter 11 protection in Delaware in October 2023 after facing nearly 100 claims for personal injury and wrongful death arising from the emission of a cancer-causing chemical in two Minnesota communities.

Initially, the tort claimants and unsecured creditors faced significant challenges to receiving any recovery out of the bankruptcy, as their claims sat behind $23 million in debt held by the parent, and were otherwise structurally subordinated to creditors at the debtor entity in which the proceeds of Bankruptcy Code section 363 were allocated.

The settlement that Brown Rudnick's team and the Committee negotiated, included agreement by Okabe to waive its debt so that the proceeds of the sale would flow to unsecured creditors. Additionally, Okabe agreed to provide approximately $15 million to tort claimants under a forthcoming Ch. 11 Plan.

Jeff Jonas leads the Brown Rudnick team, which includes Gerard Cicero, Susan Sieger-Grimm, Marcus Strong, Andrew Rizkalla and paralegal Harriet Cohen.