The news of major retailers, gyms and others filing or expecting to file for bankruptcy protection is yet another unfortunate reality of the COVID-19 pandemic crisis. A corporate bankruptcy can lead to a host of insurance-related issues, including claims made against directors and officers, competition for finite insurance limits, and disputes over who has rights or priority to, and can access, insurance policy proceeds.

For many decades, companies in the business of leasing “over-the-road” vehicles such as trucks, tractors, and trailers, have used terminal rental adjustment clause (TRAC) leases to maximize the value they can provide to their customers. Traditionally speaking, TRAC leases combine the tax advantages of leasing with an option to purchase the equipment at the end of the lease term for a residual amount determined at the inception of the lease. Since 1981, it has been well-settled that TRAC leases constitute “true” leases, and not disguised financing transactions, for federal tax purposes.

Good v RMR Investments, Inc, 428 BR 249 (ED Texas, March 31, 2010)

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A secured creditor in a chapter 11 case objected to the confirmation of the reorganization plan of the debtor, arguing that the proper “cramdown” interest rate (court-modified rate) was the pre-petition contractual default rate, rather than the significantly lower cramdown rate. After the debtor appealed, the District Court affirmed, holding that utilizing the contract rate of interest was appropriate because the debtor was solvent.

Official Committee of Unsecured Creditors of Allegheny Health, Education and Research Foundation v PricewaterhouseCoopers, LLP(3d Cir No 07-1397, May 28, 2010)

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Longview Aluminum, LLC v Brandt (In re Longview Aluminum, LLC), 2010 WL 2635787 (ND Ill, June 28, 2010)

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In re 15375 Memorial Corporation, et al, 430 BR 142 (Bankr D Del May 17, 2010)

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In re SJT Ventures, LLC, 2010 WL 3342206 (Bankr. N.D. Texas 2010)

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Paloian v LaSalle Bank, NA, 619 F.3d 688 (7th Cir. 2010)

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Hitchin Post Steak Co v General Electric Capital Corporation (In re HP Distribution, LLP), 436 B.R. 679 (Bankr. D. Kan. 2010)

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The United States Bankruptcy Court for the District of Kansas considered whether commercial vehicle leases that contained Terminal Rental Adjustment Clauses (or TRAC provisions) were true leases under Section 365 of the Bankruptcy Code or, instead, disguised financing transactions. The court held that the TRAC leases were true leases that must be either assumed or assigned pursuant to the terms of Section 365.

In re Young Broadcasting, Inc., et al., 430 B.R. 99 (Bankr. S.D.N.Y. 2010)

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