The French government has recently published a new regulation (ordonnance n°2014-326 dated March 12, 2014) amending France’s bankruptcy law. Its aim is to facilitate further restructurings of French companies, in particular with respect to pre-insolvency consensual restructurings, and to give creditors a greater say in the restructuring process.

PRE-INSOLVENCY CONSENSUAL RESTRUCTURINGS

In another major development in a case that continues to redefine the standard procedures in asbestos-related bankruptcy proceedings, on January 13, 2015, Garlock Sealing Technologies LLC announced that it had reached an agreement with the representative for future asbestos claimants that would settle all present and future asbestos claims for $358 million. The current net present value of the settlement is reportedly $205 million – considerably higher than the bankruptcy court’s liability estimate of $125 million, but well below the $1.3 billion plaintiffs had been seeking.

In In re BGI, Inc. f/k/a/ Borders Group, Inc.,1 the Second Circuit recently held that the doctrine of equitable mootness — a doctrine that permits appellate courts to refrain from hearing bankruptcy appeals relating to plan confirmation when it would be “inequitable” to do so – applies in liquidations under Chapter 11 of the Bankruptcy Code. This ruling extends the doctrine from Chapter 11 reorganizations, in which it has traditionally been applied in the Second Circuit, to liquidations.

On Monday, the Supreme Court confirmed¹ that bankruptcy courts may hear “Stern-type” matters (such as tortious interference counterclaims) that relate to bankruptcy proceedings, so long as a district court reviews the bankruptcy court’s proposed findings and renders the final decision. Other questions left in the wake of Stern v. Marshall,² however, remain unanswered and will continue to occupy the attention of parties to bankruptcy matters and courts alike.

BACKGROUND: IN THE WAKE OF STERN V. MARSHALL

A recent appellate decision in the Western District of Washington prohibited hedge fund creditors from voting on a debtor’s chapter 11 plan on the basis that the funds did not qualify as “financial institutions” for purposes of the definition of “Eligible Assignee” under the applicable loan agreement.¹ While this counter-intuitive result seems driven by the specific facts of that case, this decision serves as a useful reminder of the importance of carefully reviewing assignment restrictions when purchasing loans in the secondary market.

On January 10, 2014, in a closely watched case, Judge George Hodges of the Bankruptcy Court for the Western District of North Carolina ruled that Garlock Sealing Technologies, Inc.

In a recent opinion on an issue of first impression,¹ the United States Court of Appeals for the Second Circuit held that foreign entities seeking recognition under Chapter 15 of the Bankruptcy Code must, in addition to satisfying the requirements for recognition set forth in that chapter, have a residence, domicile, place of business or assets in the United States.

In the first appellate court decision on the issue, the Third Circuit Court of Appeals recently held that trade claims subject to disallowance under section 502(d) of the Bankruptcy Code are disallowable “no matter who holds them.”¹ In In re KB Toys Inc., the Third Circuit affirmed Bankruptcy and District Court decisions holding that trade claims subject to disallowance in the hands of an original claimant remain disallowable in the hands of a subsequent transferee.

On November 15, 2013, Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York held that original issue discount (“OID”) created in a prepetition “fair market value” debt exchange is not disallowable in bankruptcy.¹ This noteworthy ruling provides important and long-awaited guidance for the investing community on the question left open by the Second Circuit’s 1992 ruling in LTV Corp. v. Valley Fidelity Bank & Trust Co. (In re Chateaugay Corp.).²

BACKGROUND

On September 12, 2013, the United States Court of Appeals for the Second Circuit held that American Airlines, Inc. (“American”) had the right to repay $1.3 billion in debt (“Notes”) without payment of a make-whole amount.¹ The Second Circuit dismissed all of the arguments raised by U.S. Bank Trust National Association (“U.S.