QVCG Preferred Will WIN Their Appeal

View

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 achieve my intrinsic value projection is the appeal filed by certain preferred shareholders’ seeking to overturn the order that confirmed QVC’s plan of reorganization (the “Plan”).

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 by converting legacy senior noteholders and revolving credit facility lenders into new debt and 100% (before mgmt. incentive plan) of the new common equity in reorganized QVC.

Confirmation was heavily contested by certain QVCG Preferred Shareholders (the “Preferreds”) who challenged the intercompany settlement (“Intercompany Settlement”) between operating entity QVC, Inc. (“QVCI”) and holding company QVC Group, Inc. (“QVCG”). That settlement and the resulting $400M intercompany claim effected pursuant to it essentially swept all holding-company cash and equity to QVCI and thus to the noteholders and credit facility lenders who would form the reorganized entity’s funded debt and equity holders going forwards. The settlement, Plan and supporting Plan documents also rendered the intercompany claim “unimpaired” while wiping out public preferred equity holders without a vote.

In opposing confirmation, 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 owed only a minimal amount of trade obligations (approx. $200K). 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.

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.

Equitable Mootness

Before discussing why I believe the Preferreds will prevail in their appeal, I will discuss why the issue of equitable mootness will prevent the Preferreds’ appeal from being heard. Equitable mootness is a legal concept that bars parties from appealing confirmed chapter 11 plans on the basis that, “you can’t put the toothpaste back into the tube,” or more specifically, that if a plan is already active, the parties involved have already relied on it, and changes would cause such drastic problems that it cannot become subject to appellate review.

Equity mootness will not prevent the QVC plan appeal from going forward because the 5th Circuit has consistently shown that they don’t give the concept much weight. 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 even stated, “to the extent equitable mootness exists at all, we affirm that it cannot be ‘a shield for sharp or unauthorized practices.’”

Why I Believe the Preferreds Will Win

Given equitable mootness will not prevent appellate review, I discuss below why I believe the Appellants will be successful here:

1. Judge Perez Erred in Applying Business Judgment and the Rule 9019 Settlement Cannot Withstand Entire Fairness Scrutiny

Judge Perez applied the most debtor friendly standard, business judgment, when reviewing the Rule 9019 settlement that granted QVCI the $400M intercompany claim against QVCG that consumed all value held by that estate, to the detriment of preferred shareholders. The standard of review speaks 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, 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, instead of entire fairness, 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 cited several cases in their argument for entire fairness. Judge Perez did not find the Preferreds’ case law persuasive, asserting that entire fairness was the correct standard of review for the cases cited by the Preferreds because, unlike in the QVC intercompany settlement negotiations, the underlying transactions in those matters were “conflicted”, stating “[t]he 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.” Critically, Judge Perez felt that QVC’s appointment of independent directors at QVCI and QVCG prior to intercompany claim settlement negotiations cleansed the settlement of any potential conflicts:

“That the Intercompany Settlement resolved potential avoidance and illegal dividend claims for QVC dividends to QVCG, and QVCG Preferred Dividends to Preferred Shareholders did not create a conflict, because the recently-appointed Disinterested Directors were the ones investigating, negotiating, and proposing to release these claims—not the directors who authorized the dividends to begin with.”

In the corresponding footnotes to Judge Perez’s assertion of prior conflicts in the cases sited by the Preferreds, 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

Judge Perez clearly erred in his analysis here. The Vanderbilt Minerals footnote does not suggest any conflict. Furthermore, 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 their behalf. 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 and any conflict they suffered from did not extend to the debtor. 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 the debtor might have had.

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 should be applied to settlements between affiliates. 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.

Additionally, I do also believe that the independent directors themselves and settlement process were actually conflicted because the Debtors, including both QVCI and QVCG, relied on certain shared advisors, i.e. Kirkland & Ellis and Evercore (the “Joint Debtor Advisors”).Judge Perez found that the shared use of the Joint Debtor Advisors did not create a conflict because these advisors only “facilitated information flow between the company and each Disinterested Director group, providing diligence, fund flow analyses, financial projections, solvency analysis, and valuation analysis of various Debtor entities to equally and adequately inform them of the intercompany transactions and potential intercompany claims,” but did not “tell the Disinterested Directors what opinions to formulate, or what conclusions to arrive at with respect to the investigation and negotiation.” Any use of any analysis by QVCG provided by advisors funded at least in part by QVCI creates a conflict. Such conflict only appears more pronounced when accompanied by the facts that (a) Evercore provided the only “analysis” that suggested QVCI was insolvent at the time of certain transfers (a critical finding needed to be able to pursue fraudulent transfer claims) to QVCG and that such analysis consisted only of historical bond prices but, for some unexplained reason, excluded QVCI’s three bond issues with the most near term maturities, trading at 80 – 90% (i.e. suggesting solvency) while including other longer dated maturities trading at discounted levels.

The determination of what standard of review to apply to the 9019 settlement is a matter of law and will be reviewed de novo, i.e. with no deference given the bankruptcy court’s decision.

Under an entire fairness review, the settlement does not hold up. To approve a settlement under Federal Rule of Bankruptcy Procedure 9019, the court must find that the settlement is “fair, equitable and in best interests of the estate and creditors”. In the 5th Circuit, to make this determination, the court must satisfy a three-part test (the *Jackson Brewing *test), by evaluating:

• Probability of success in the litigation
• Complexities and likely duration of the litigation
• All other factors “bearing on the wisdom of the compromise”

In Foster Mortgage, the 5th Circuit held the third prong to include the interests of creditors.

Judge Perez found that the Debtors had satisfied the first prong, stating that the fact that the independent directors “…did not formulate a determination on the likelihood of success in prosecuting—or defending—against the claims…” did not fail to satisfy prong one of the *Jackson Brewing *test because “[the independent directors of each entity] independently formulated the determination that settling under the terms of the Intercompany Settlement was in the best interest of the Debtors’ estate, as well as the Debtors-entities’ stakeholders. Under business judgment deference, it is not the province of the Court to second guess those determinations.”However, under entire fairness review, the independent directors will be required to demonstrate that they did evaluate the probability of success in litigating the claims that were settled and such directors would not be able to meet this burden as Mr. Metzler, independent director for QVCG, specifically stated in deposition that they never came to a view as to the probability of success in litigating the claims held by QVCI.

The settlement also fails the *Foster Mortgage *test as proven by the Preferreds vocal opposition to the settlement. Judge Perez found that *Foster Mortgage *didn’t apply by stating “no creditor has lobbied an objection to the Intercompany Settlement or the Plan. The only objectors are equity and the U.S. Trustee.” However, the 5th Circuit’s *Foster Mortgage *decision was predicated on the fact that unsecured creditors were the parties impacted by the Rule 9019 settlement, not equity holders. Given that FRBP 9019 requires the court to evaluate whether the settlement is “fair and equitable and in the best interest of the estate” and that in Foster Mortgage, the whole point of the giving deference to the reasonable views of creditors was to ensure that the “settlement [was] truly the product of arms-length bargaining, and not of fraud or collusion,” the court should extend *Foster Mortgage *to apply to the stakeholder group that is directly affected by the settlement, i.e. preferred shareholders. While the Preferreds hold only a minority of total preferred shares, no preferred shareholder expressed support for the settlement and in reality the prospects of organizing a desperate group of unknown holders of a widely-held publicly traded security are extremely difficult.

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

Before I make this argument, I need to highlight the sections of the US bankruptcy that underpin it:

• Section 1129(a)(10): Section 1129 of the US bankruptcy lists requirements a Plan must meet to be able to be confirmed.1129(a)(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 must have accepted the plan and such class cannot be a class of claims held by insiders
• **Section 1124: **Defines “impairment” by stating, subject to sec 1123(a)(4), a class is impaired unless a plan leaves their contractual rights unaltered
• **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, the only seemingly impaired class was the intercompany claim, as it was receiving cash and securities valued at roughly $278M vs its $400M face value, while all other classes were either paid in full or received no recovery and were deemed to reject. To avoid a 1129(a)(10) violation, QVCG said this potential impairment of the intercompany claim was cured by QVCI accepting all QVCG 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**.**

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. The 5th Circuit held in Village at Camp Bowie that if a claim is artificially impaired, the plan proponent’s motive must be considered. Given that, if the intercompany claim was impaired the debtors would have needed a non-insider class to vote for the plan and thus, the Debtors would have likely needed to allow the Preferreds to vote on the Plan. 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).Having the Plan be “market tested” was what Congress was trying to achieve when they rewrote section 1129(a)(10).The non-insider class provision was not in the original language and was only added to prevent debtors from unilaterally imposing plans on their creditors and instead ensure such plans would receive true third-party review. 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. 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. 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) the imposition of independent directors does not change the fact that the parties to the settlement are related and thus cannot satisfy Congress’s intention to have the plan reviewed by 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 hard 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 particularly egregious, including:

• $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)
• 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 and no operations, while operating entities like QVCI were cash flow negative. I cannot understand the Judge’s reasoning here
• QVCG’s independent directors admitted in depositions that they did not evaluate whether the releases preferred shareholders were receiving as their only compensation under the Plan were even beneficial to them
• 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 to 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.