Bedmar, LLC: Delaware Two-Step Dismissed in 81-Day Bad Faith Filing

Bedmar, LLC's 81-day chapter 11 case resulted in the dismissal of a "Delaware Two-Step" filing involving commercial lease liabilities. Formed just six days before its June 9, 2025 bankruptcy filing through a divisional merger under Delaware law, Bedmar was formed to isolate approximately $372 million in landlord lease claims from its parent, National Resilience—a contract development and manufacturing organization (CDMO) that had raised over $2 billion from investors including T. Rowe Price, Baillie Gifford, and D1 Capital Partners.

On August 29, 2025, Judge J. Kate Stickles of the U.S. Bankruptcy Court for the District of Delaware dismissed the case for lack of good faith under Bankruptcy Code section 1112(b), applying the Third Circuit's LTL Management precedent. The dismissal ruling preserved landlords' full contract claims—a potential $372 million exposure—against the Resilience enterprise, after the company sought to reduce landlord recovery to approximately $33 million through the statutory cap under section 502(b)(6). The case applied a divisional merger bankruptcy approach in the commercial lease context and cited good faith principles developed in mass tort litigation.

Court	U.S. Bankruptcy Court, District of Delaware
Judge	Hon. J. Kate Stickles
Case Number	25-51298
Debtor(s)	Bedmar, LLC
Parent Company	National Resilience Holdco, Inc.
Petition Date	June 9, 2025
Case Outcome	Dismissed for lack of good faith
Dismissal Date	August 29, 2025
Debtor's Counsel	Pachulski Stang Ziehl & Jones LLP
Financial Advisor	Alvarez & Marsal
Debtor's Manager	Christopher Sontchi (former Delaware bankruptcy judge)
Aggregate Lease Liability	~$372 million
Proposed Capped Liability	~$33 million
Targeted Liability Reduction	91%
DIP Facility	$25 million (unsecured, from affiliate)
Employees	None
Revenue/Operations	None

National Resilience: The Parent Company

National Resilience launched in 2020 with approximately $800 million in venture funding from ARCH Venture Partners and said it aimed to expand biopharmaceutical manufacturing capacity and protect drug supply chains. The company positioned itself as a CDMO focused on supporting biotechs that lacked in-house production capacity. According to company profile data, Resilience ultimately raised a total of $3.174 billion in funding, with investors that included T. Rowe Price, Baillie Gifford, 8VC, D1 Capital Partners, and Lux Capital.

At its peak, National Resilience operated ten manufacturing facilities across the United States and Canada, employing approximately 3,000 workers. The company's customer base grew to include major pharmaceutical players, including Eli Lilly, for which Resilience manufactured GLP-1 diabetes drugs. The COVID-19 pandemic supported capacity expansion as demand for vaccine and therapeutic manufacturing increased, prompting Resilience to acquire and build out facilities. Among these acquisitions was the Durham, North Carolina gene therapy site purchased from bluebird bio for $110 million in 2021.

COVID-era demand decline. Demand for COVID-related manufacturing contracts declined as those contracts expired and the broader biotech sector contracted. In a letter to customers disclosed alongside the bankruptcy filing, CEO William Marth acknowledged that the company's "capacity expansion has outpaced industry demand."

In January 2025, Resilience announced plans to lay off approximately 120 workers at its Durham, North Carolina facility, with terminations effective March 7, 2025. The company characterized the layoffs as necessary to "right size" the facility based on declining demand in the gene therapy sector. The Durham cuts preceded a larger scale-back announced alongside the Bedmar filing.

Facility Closures and Restructuring Announcement.

On June 9, 2025—the same day Bedmar filed its chapter 11 petition—National Resilience announced it would close six of its ten manufacturing facilities, consolidating operations at its Cincinnati, Ohio and Toronto, Canada locations. The closures affected three Massachusetts facilities (Bedford, Allston, and Marlborough), two California plants (both in San Diego), and one in Alachua, Florida. These six facilities were held under long-term leases that would generate landlord claims if rejected or abandoned outside of bankruptcy.

The Delaware Two-Step Structure

The Bedmar filing employed a corporate restructuring technique known as the "Delaware Two-Step"—a variant of the "Texas Two-Step" strategy that gained national attention through Johnson & Johnson's talc liability case. The strategy uses divisive merger statutes that permit a single legal entity to divide into multiple resulting entities, with the allocation of assets and liabilities between the resulting entities determined by the plan of division. Texas pioneered divisive merger statutes, and Delaware adopted comparable provisions for LLCs in 2018 and extended them to limited partnerships in 2019.

Delaware's divisive merger framework. Under the Delaware Limited Liability Company Act, an LLC may divide into two or more resulting entities through a plan of division. Unlike Texas law, Delaware limits such divisions to LLCs and limited partnerships, and the resulting entities must be of the same type as the dividing entity. Delaware law provides that if a court subsequently determines a division constitutes a fraudulent transfer, both the dividing entity and the resulting entities remain jointly and severally liable to the aggrieved creditors.

Bedmar's Specific Divisional Merger.

On June 3, 2025—just six days before the bankruptcy filing—National Resilience Holdco, Inc. and affiliated entities executed a divisional merger that created Bedmar, LLC as a new entity to hold specific liabilities. The allocation between Bedmar and the continuing Resilience entities was:

The divisional merger left Bedmar as an LLC with no employees, no business operations, and no revenue stream. Its assets were the cash allocation (intended to fund bankruptcy administration) and the leasehold interests in six manufacturing facilities that Resilience had vacated. Its liabilities were the corresponding landlord claims.

Section 502(b)(6) cap strategy. The filing's commercial logic centered on Bankruptcy Code section 502(b)(6), which imposes a statutory cap on a landlord's damages when a debtor rejects a real property lease. Under this provision, a landlord's claim for lease rejection damages is limited to the greater of (a) one year of gross rent or (b) 15% of the remaining lease term, with a maximum cap of three years' rent. In bankruptcy, the debtor may "reject" an unexpired lease of real property under section 365, which constitutes a material breach triggering the landlord's damages claim—but only at the capped amount.

For Bedmar, the arithmetic was:

If the bankruptcy filing succeeded, landlords holding claims worth approximately $372 million in aggregate would see their recoverable damages reduced to approximately $33 million—a 91% reduction under the statutory cap.

Financing the strategy. National Resilience funded the restructuring transaction with capital from existing shareholders. Court filings indicated the company secured approximately $135 million in bridge financing from current investors to support the restructuring, with an additional $250 million announced alongside the Bedmar filing. The stated understanding was that successful lease rejection through Bedmar would preserve value for the remaining Resilience enterprise by eliminating hundreds of millions in fixed obligations.

The 81-Day Case: From Petition to Dismissal

First Day Filings.

Bedmar's chapter 11 commenced on June 9, 2025 with a set of coordinated first-day filings:

The First Day Declaration was signed by Christopher Sontchi, who served as Bedmar's sole Manager. Sontchi is a former United States Bankruptcy Judge for the District of Delaware. In his declaration, Sontchi asserted that the lease portfolio required restructuring to maximize value for all stakeholders, characterizing the filing as a legitimate response to operational and financial challenges.

Landlord Opposition Emerges.

The filing faced immediate challenge from landlords who argued the case attempted to shift hundreds of millions in contractual liability from the parent to an entity with no employees or operations. Three landlords emerged as principal objectors:

Cobalt PropCo, LLC served as landlord for the Bedford, Massachusetts facility. In its Motion to Dismiss, Cobalt argued the divisional merger constituted manufactured insolvency. Citing the Third Circuit's LTL Management LLC decision, Cobalt characterized the Bedmar filing as a litigation tactic rather than a genuine restructuring effort. The landlord documented that the Bedford lease was current at the time of the divisional merger—no prepetition default or pending eviction action existed. Any financial distress, Cobalt argued, was created by the divisional merger itself.

Harvard University held the lease for the Allston, Massachusetts facility. The university joined Cobalt's dismissal arguments, objecting to the use of bankruptcy as a mechanism to escape long-term lease obligations that were fully performing at the time the bankruptcy was engineered.

CEGM Alachua, LLC served as landlord for the Alachua, Florida facility and joined the dismissal coalition. Together, the landlord objectors represented a portion of the $372 million in aggregate lease exposure and presented a unified challenge to the filing's legitimacy.

U.S. Trustee Motion to Dismiss.

The Office of the U.S. Trustee questioned the good faith of the Bedmar filing in June 2025, then formalized its objection through a Motion to Dismiss. The U.S. Trustee's arguments tracked the landlords' position:

1. Bad Faith Filing: The case was filed to achieve litigation objectives—capping landlord claims—outside any legitimate bankruptcy purpose. The U.S. Trustee argued the filing sought to use section 502(b)(6) rather than to reorganize an operating business.

2. Manufactured Insolvency: The debtor was created specifically to isolate liabilities through divisional merger. The U.S. Trustee argued any insolvency existed because the divisional merger allocated liabilities without corresponding revenue-generating assets.

3. LTL Management Precedent: The Third Circuit's 2023 decision dismissing Johnson & Johnson's talc liability vehicle established that divisive merger filings may be dismissed for lack of good faith when the debtor manufactured financial distress rather than experiencing genuine commercial distress.

4. No Legitimate Reorganization: Bedmar had zero employees, zero operations, and zero revenue. The U.S. Trustee argued the entity had no business to reorganize.

DIP Financing Structure.

Bedmar sought approval of debtor-in-possession financing to fund its bankruptcy administration:

The court entered a DIP Order on July 1, 2025. An affiliate of National Resilience served as the DIP lender, and the facility was unsecured.

Dismissal Ruling: LTL Management Extended to Commercial Leases

August 29, 2025 Decision.

After a two-day trial on the dismissal motions, Judge Stickles granted the landlords' and U.S. Trustee's motions to dismiss. Her Dismissal Opinion and Dismissal Order, entered August 29, 2025, dismissed the case for lack of good faith under Bankruptcy Code section 1112(b). The ruling applied Third Circuit precedent to commercial lease disputes.

Good Faith Analysis Under Section 1112(b).

Section 1112(b) of the Bankruptcy Code permits dismissal of a chapter 11 case "for cause," a concept courts have interpreted to include lack of good faith in filing the petition. In the Third Circuit, the good faith inquiry focuses on whether the chapter 11 petition serves a valid bankruptcy purpose—whether the filing addresses genuine financial distress or instead uses bankruptcy procedures for improper ends.

Judge Stickles articulated the central principle: "Bona fide financial distress is a predicate to good faith." The court concluded Bedmar had not shown that its filing responded to genuine financial distress.

Key findings from the Opinion:

• Bedmar was created through divisional merger specifically to file bankruptcy
• The entity had no genuine business purpose beyond liability isolation
• The filing was a litigation tactic designed to cap landlord claims
• Manufactured financial distress does not satisfy the good faith requirement
• Bedmar's assets of approximately $41 million exceeded its Bankruptcy Code-capped liabilities of approximately $32-33 million

Application of LTL Management.

The court's analysis drew heavily on the Third Circuit's January 2023 decision in In re LTL Management LLC. That case arose from Johnson & Johnson's response to billions of dollars in talc-related personal injury claims. J&J executed a divisive merger under Texas law, creating LTL Management LLC just two days before LTL filed chapter 11 to resolve talc liabilities. The Third Circuit dismissed LTL's case, holding that "a debtor who does not suffer from financial distress cannot demonstrate its Chapter 11 petition serves a valid bankruptcy purpose."

The LTL Management court emphasized that financial distress must be genuine—"not only apparent but also sufficiently immediate" to justify invoking bankruptcy protections. The existence of a funding agreement providing LTL access to $61.5 billion from J&J and affiliated entities undermined any claim of genuine distress: "The bigger a backstop a parent company provides a subsidiary, the less fit that subsidiary is to file."

Judge Stickles applied this framework to Bedmar with parallel reasoning:

Application to Commercial Leases.

The Bedmar dismissal applied LTL Management principles to commercial lease liabilities. The ruling applied Third Circuit good faith standards to a divisive merger filing involving non-tort liabilities. In Bedmar, landlords filed early dismissal motions, coordinated with the U.S. Trustee, cited LTL Management, documented the debtor's lack of operations, and focused on the prepetition divisional merger timeline. The court dismissed the case for lack of good faith.

Post-Dismissal: National Resilience Restructures Outside Bankruptcy

Resolution of Lease Obligations.

The dismissal left National Resilience to address its lease obligations outside the section 502(b)(6) cap. The company entered direct negotiations with landlords who retained their full contractual rights. Specific settlement terms were not publicly disclosed.

October 2025: $825 Million Financing.

In October 2025—approximately two months after the Bedmar dismissal—National Resilience announced long-term debt financing of up to $825 million from Oak Hill Advisors. The financing was intended to strengthen the company's balance sheet and fund continued growth in its streamlined CDMO business. The announcement stated that Resilience had "successfully resolved the lease obligations related to its underutilized sites."

Continued Operations.

Following the restructuring, National Resilience continued operations at its Cincinnati, Ohio and Toronto, Canada facilities, serving pharmaceutical customers including Eli Lilly for GLP-1 drug manufacturing.

Key Timeline

Frequently Asked Questions

What is a Delaware Two-Step or Texas Two-Step in bankruptcy?

A divisive merger strategy where a company divides into two entities—one holding targeted liabilities for bankruptcy purposes and one retaining profitable operations. Texas pioneered divisive merger statutes permitting this corporate division, and Delaware adopted similar provisions for LLCs in 2018. The strategy gained national attention when Johnson & Johnson used a Texas divisive merger to isolate talc-related tort claims in LTL Management LLC. The "Two-Step" refers to the two-part maneuver: first, execute the divisive merger to create a liability-holding entity; second, file that entity in bankruptcy to address the isolated liabilities.

Why was Bedmar's chapter 11 case dismissed?

Judge Stickles found the filing lacked good faith under Bankruptcy Code section 1112(b) because Bedmar was created through divisional merger just six days before filing and had no business operations or revenue. The entity had no employees and held lease liabilities to invoke the section 502(b)(6) cap. Applying the Third Circuit's LTL Management framework, the court held that manufactured financial distress does not satisfy the good faith requirement.

What was the section 502(b)(6) cap strategy?

Section 502(b)(6) of the Bankruptcy Code limits a landlord's claim for lease rejection damages to the greater of one year's rent or 15% of the remaining lease term (not exceeding three years). By filing Bedmar in chapter 11 and rejecting the leases, National Resilience sought to reduce approximately $372 million in aggregate landlord claims to approximately $33 million—a 91% reduction. The strategy would have allowed the parent company to shed lease obligations without filing bankruptcy itself.

How did LTL Management precedent apply to commercial leases?

The Third Circuit's January 2023 LTL Management decision held that divisive merger filings may be dismissed for lack of good faith when the debtor lacks genuine financial distress. Judge Stickles applied this framework to Bedmar, citing the divisional merger timing and the debtor's lack of employees or operations. The Bedmar case applied LTL Management principles from mass tort litigation to commercial lease disputes.

What was National Resilience's business and why did it need to restructure?

National Resilience is a contract development and manufacturing organization (CDMO) founded in 2020 to help biotechs with drug production. The company raised over $3 billion in funding and expanded during the COVID-19 pandemic to meet demand for vaccine and therapeutic manufacturing. When pandemic-related contracts expired and biotech sector demand declined, Resilience said its capacity expansion had outpaced industry demand.

What was Christopher Sontchi's role in the case?

Christopher Sontchi served as Bedmar's sole Manager and signed the First Day Declaration. He is a former United States Bankruptcy Judge for the District of Delaware—the same district where Bedmar filed.

What happened to National Resilience after Bedmar was dismissed?

National Resilience continued operating outside bankruptcy at its Cincinnati and Toronto facilities, maintaining its CDMO business serving pharmaceutical customers. In October 2025, the company announced long-term debt financing of up to $825 million from Oak Hill Advisors and stated it had "successfully resolved" the lease obligations related to its underutilized sites. The resolution was achieved through direct negotiation with landlords—who retained their full contractual claims following the dismissal—rather than through the bankruptcy cap strategy.

How did landlords challenge the Bedmar filing?

The Bedmar dismissal illustrates how landlords challenged a filing they said involved manufactured distress. In Bedmar, landlords filed dismissal motions early, coordinated with the U.S. Trustee's office, documented that leases were current and distress was created by the divisional merger itself, cited LTL Management precedent, and emphasized the debtor's lack of employees, operations, and revenue.

How long did the Bedmar case last?

The case lasted 81 days from the June 9, 2025 petition filing to the August 29, 2025 dismissal order. The dismissal was entered following a two-day trial on the pending motions.

How does Third Circuit doctrine compare to other circuits?

Courts in the Third Circuit impose significantly higher good faith requirements than courts in some other circuits. While the LTL Management framework is not binding outside the Third Circuit, the Bedmar decision applies that framework to a divisive merger filing involving commercial lease liabilities.

Who is the claims agent for Bedmar, LLC?

Epiq Corporate Restructuring, LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

Read more chapter 11 case research on the ElevenFlo blog.