QVCG Preferred Will WIN Their Appeal

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I believe QVC preferred shares (ticker: QVCPQ) are worth $1.96 - $24.41 per share, implying 1,056% to 13,991% upside from their final trading price of $0.17 per share on 8/6/26.The catalyst to unlock value with certain preferred shareholders’ successful appeal of the order confirming QVC’s plan of reorganization.

Background

QVC Group, Inc. is a global multiplatform retailer that operates live video commerce networks—including QVC and HSN—broadcasting interactive shopping programming to millions of homes via television, streaming platforms, and social e-commerce.On April 16, 2026, QVC Group and over 50 domestic subsidiaries filed a prepackaged Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas before Judge Alfredo R. Pérez.

The debtors were able to confirm a plan that slashed total funded debt by over $5 billion (reducing debt to ~$1.3 billion) by converting legacy senior noteholders and revolving credit facility lenders into new debt and 100% of the new common equity in reorganized QVC.

Confirmation became heavily contested when QVCG Preferred Shareholders (the “Preferreds”) challenged a $400 million intercompany settlement (“Intercompany Settlement”) between operating entity QVC, Inc. (“QVCI”) and holding company QVC Group, Inc. (“QVCG”). The settlement swept essentially all holding-company cash and equity to the operating company, rendering the intercompany claim “unimpaired” while wiping out public preferred equity holders without a vote.

The Preferreds asserted that QVCG was solvent as the entity held $195M in cash and a 62% interest in Cornerstone Brands, Inc., did not have any funded debt and, Preferreds asserted, minimal trade obligations.The Preferreds challenged the legality of the Intercompany Settlement, believing it was an unlawful artificial asset sweep designed specifically to siphon parent-level value to debt holders.

Judge Pérez confirmed the plan in July 2026, and QVC Group officially emerged from Chapter 11 on August 6, 2026.A group of Preferreds filed an appeal on 7/16/26 to the US District Court for the Southern District of Texas.The Preferred have expressed their intent to file a certification for direct appeal to the 5th Circuit.

Why I Believe the Preferreds will be Successful on Appeal

Before discussing why I believe Preferreds arguments will be successful, I should mention why I believe equitable mootness, a judge-made rule used to dismiss bankruptcy appeals on the grounds that the plan is already active, parties have relied on it, and changes would cause major problems, won’t prevent appellate review of the QVC plan.Basically, the 5th Circuit’s been pretty firm that they don’t give a lot of stock to equitable mootness.In a series of a cases (Serta Simmons Bedding, NexPoint Advisor, L.P. v. Highland Capital Management, L.P., In re Pacific Lumber Co., Bouchard v. Bouchard Transportation Co.) the 5th Circuit has found equitable mootness didn’t prevent review.In their 2025 Serta Simmons Bedding decision, the 5th Circuit went on to state, “to the extent equitable mootness exists at all, we affirm that it cannot be ‘a shield for sharp or unauthorized practices.’”

The Preferreds have listed the following items in their Statement of Issues to be Present on Appeal showing that they will argue the bankruptcy court erred in (1) approving the Intercompany Settlement, (2) holding that the Plan didn’t violate bankruptcy code section 1123(a)(4), (3) holding that the Plan didn’t violate bankruptcy code section 1129(a)(10) and (4) holding that the Plan was proposed in good faith.

I believe the Preferreds will be able to successfully argue items 1 and 3 and potentially item 4 as well.

1. Judge Perez Erred in Approving the Rule 9019 Settlement

Business Judgment vs Entire Fairness

A critical point in overturning the Rule 9019 settlement will be the determination that the Court should have reviewed the settlement under the entire fairness standard, rather than business judgment.The standards speak to the support the debtors must provide in order for the Court to approve the settlement.Business judgment is a deferential legal standard that presumes unconflicted directors acted in good faith and in the best interests of the company. Entire fairness is the most rigorous standard of judicial review, triggered when insider conflicts or self-dealing exist, which strips away that deference and places the burden on fiduciaries to affirmatively prove both fair dealing (process) and fair price (economics).

Judge Perez erred in determining business judgment was the correct standard of review for the settlement.Judge Perez, citing ASARCO LLC v. Americas Mining Corp., stated that “[c]ourts apply entire fairness when the facts of the case demonstrate one party stands on both sides of the transaction.” The Preferred Shareholders (“Preferreds”) cited several cases in their argument for entire fairness.Despite this view, Judge Perez did not find the Preferreds’ case law persuasive, asserting that unlike in the QVC intercompany settlement negotiations, entire fairness was the correct standard of review for those other cases because the underlying transactions were “conflicted”:

“The Preferred Shareholders cite numerous cases where courts [determined entire fairness was the correct standard of review]. Those courts, however, applied heightened scrutiny only after finding the underlying transactions were conflicted.”

In the corresponding footnotes, Judge Perez provides explanations on why he feels the underlying transactions were conflicted:

• In re Vanderbilt Minerals, LLC: Parties agreed at hearing that entire fairness was the appropriate standard
• In re Latam Airlines Group, S.A.: Entire fairness was appropriate because parties to a certain tranche of DIP financing were present on both sides of the transaction due to shared equity ownership
• In re Soundview Elite Ltd.: Apply entire fairness as sign-off board members were directors for both entities and transaction facilitated by insider affiliates

I find Judge Perez’s analysis inconclusive and believe the 5th Circuit will as well.The Vanderbilt Minerals footnote does not suggest any conflict.Critically, Judge Perez states that the QVC negotiations did not suffer from the same conflicts because of the appointment of independent directors.However, an independent manager was appointed in Vanderbilt Minerals for the debtor.In that matter, the debtor negotiated an intercompany settlement with affiliates.The debtor appointed Ben Pickering as its independent manager to ensure that an independent third party negotiated the settlement on behalf of the debtor.While the affiliates do not appear to have engaged independent managers, such parties were non-debtors and as such these entities and their actions were not under the purview of the bankruptcy.Additionally, the bankruptcy court’s analysis of whether the settlement was fair, equitable and in the best interest of the estate applies only to the entity in question, i.e. the debtor, and thus Vanderbilt Mineral’s appointment of an independent manager cures any potential conflict.

In Latam Airlines, the debtors executed a DIP financing with certain of their shareholders.To ensure that the board of directors was not conflicted, all directors with any association to the DIP lenders recused themselves, leaving only two directors not affiliated with the DIP lenders. Judge Garrity determined both those directors were independent and they were the only ones who voted on the DIP financing proposal.Critically, Judge Garrity held that the independence of the directors approving the DIP financing did not reduce the standard of review required, it simply satisfied the “fair-dealing” prong of the entire fairness analysis.

Thus, the Vanderbilt Minerals and Latam Airlines cases illustrate that Judge Perez erred as a matter of law in determining that the business judgment standard of review can be applied to settlements between affiliates if there is no conflict.Entire fairness is the proper standard of review for all settlements of insider transactions in bankruptcy proceedings and the lack of a conflict of interest simply serves to help satisfy the “fair-dealing” prong of the entire fairness test.While neither *Vanderbilt *or Latam are controlling, they should prove persuasive authority that guides the 5th Circuit here.

2. The Plan Violates section 1129(a)(10)

Background

1. Section 1129(a)(10): Section 1129 of the US bankruptcy lists requirements a Plan must meet to be able to be confirmed.Subsection 10 states that if a class of claims is impaired under the plan, at least one class of claims that is impaired under the plan has accepted the plan, determined without including any acceptance of the plan by any insider
2. **Section 1124: **Defines “impairment” by stating, subject to sec 1123(a)(4), a class is impaired unless a plan leaves their contractual rights unaltered
3. **section 1123(a)(4): **A plan shall, provide the same treatment for each claim or interest of a particular class, unless the holder of a particular claim or interest agrees to a less favorable treatment of such particular claim or interest, i.e. accepting less than payment-in-full = unimpaired

In the QVCG plan, no claims were eligible to vote as every class was unimpaired (i.e. GUCs, the QVCI intercompany claim) or received no recovery and deemed to reject the Plan (preferred and common shareholders).However, the QVCI intercompany claim was allowed for $400M but was estimated to only recover approx. $277M ($195M cash, $82M value of CBI equity).QVCG said this impaired was cured by QVCI accepting the cash and equity as payment-in-full for their claim.The Preferreds argued this acceptance didn’t leave the claim unimpaired and that the Plan did not satisfy 1129(a)(10).Judge Perez held that QVCG only has unimpaired classes of claims as QVCI’s consent to the to lesser treatment than payment-in-full rendered its claim unimpaired per 1123(a)(4) and 1124**.**

AV View

1. I find the Preferred’s argument here compelling and additionally am encouraged that this issue is a question of law that will be reviewed de novo
2. Further, the 5th Circuit held in Village at Camp Bowie that if a claim is artificially impaired, the plan proponent’s motive must be considered
3. Given that, if the intercompany claim was not impaired the debtors would have needed a non-insider class to vote for the plan, the Debtors would have likely needed to allow the Preferreds to vote on the Plan
4. Based upon this dynamic, I believe the 5th Circuit will find that the artificial unimpairment was designed to prevent Preferreds from voting on the Plan, prevent the plan from being truly “market tested” and does not meet the good faith requirement in Camp Bowie and 1129(a)(3)
5. The “market tested” requirement relates to congressional intent in crafting section 1129(a)(10).The non-insider class provision was added to prevent debtors from unilaterally imposing plans on their creditors and ensuring such plans would receive true third party approval
6. Critically, in Camp Bowie, the Plan proponents artificially impaired a class of third party claims, enabling them to vote on, i.e. market test, the Plan
7. The counterargument that QVC will argue is that the independent directors appointed at QVCG and QVCI met the “market testing” requirement and that ensuring the intercompany claim was unimpaired in the plan was designed to allow for a value maximizing reorganization of all the debtors rather than to take value away from the Preferreds
8. However, I do not believe the 5th Circuit will agree that an intercompany creditor reducing their recovery to avoid impairment qualifies as “market testing” a plan as (a) no vote on the Plan would occur, only the prevention of true third parties from voting and (b) even if the debtors have appointed independent directors, their goals in a restructuring are different than true independent third parties

4. The Plan Was Not Proposed in Good Faith?

Lastly, regarding good faith, despite there being issues of both law (de novo review) and fact (clear error) I think the Preferreds will have a harder time persuading the 5th Circuit proving bad faith overall, not specifically related to the 1129(a)(10) issue.However, I do believe many of the facts and events leading to the Rule 9019 settlement are pretty ridiculous, including:

1. $1.7B of the “billions” of the potential claims that could have been asserted against the QVCG estate come from constructive fraudulent transfer theories.In order for these claims to be viable, the transferee must have been insolvent when the transfer was made.QVCI received multiple solvency opinions when making these transfers attesting to their solvency, QVCI does not appear to have been insolvent based upon standard solvency testing methodology and the only evidence of insolvency is from bond prices provided by a conflicted financial advisors in which the advisor left off the three most near maturity bonds which were trading at levels indicating solvency (80 – 90c)
2. Judge Perez found that QVCI had significant leverage over QVCG in settlement negotiations in part because both entities disinterested directors didn’t know how QVCG would be able to fund the litigation despite holding $195M of unencumbered cash at the petition date
3. QVCG’s independent directors admitted in depositions that they did not evaluate the costs or probabilities of success of litigating the potential claims with QVCI or whether the releases the Preferreds were receiving as their only compensation under the Plan were beneficial to them
4. QVCG’s independent directors refused to engage with counsel for the Preferreds, despite Cleary Gottlieb making formal outreach requests prepetition to discuss the intercompany claims and potential restructuring terms. The Preferreds argue that excluding the only constituency likely to be effected by the insider settlement strongly suggests bad faith

Valuation

Should the Appellants prevail on any of the above points, I would expect the Court the remedy the illegal plan provisions via an order compelling reorganized QVC to pay monetary damages to the Appellants rather than a vacatur of the confirmation order.This is due to the 5th Circuit’s strong preference for targeted fractional relief rather than unwinding plans that have been implemented.In such a scenario, I project the minimum award to be the $25M initially requested by QVCG’s independent directors.This would generate approx. $1.97 per share to the Preferreds.In the high scenario, I assume the award equates to all QVCG cash plus the value of the Cornerstone stock, plus interest for the duration of the appeal period (estimated 2yrs) at 6%, equating to $310M or $24.41 per share.