In recent weeks, a number of transactions have come across our desks involving levered feeders set up as an investment vehicle for insurance-related investors. For regulatory reasons, these vehicles are established such that each such investor’s commitment is comprised of both a loan commitment (the “Debt Commitment”) and an equity commitment (the “Equity Commitment”). This structure presents a challenge for lenders trying to balance the requested borrowing base treatment for investor commitments of this type against the potential bankruptcy implications that this structure poses.
On December 19, 2019, the United States Court of Appeals for the Second Circuit (the “Second Circuit”) affirmed a ruling of the United States District Court for the Southern District of New York (the “District Court”) dismissing constructive fraudulent conveyance claims brought by representatives of certain unsecured creditors of Chapter 11 debtor Tribune Company (“Tribune”)
The National Economic Research Associates ("NERA"), an economic consulting firm, demonstrated in a recent article how economic analysis can be used to assess allegations related to credit default swaps ("CDS") and the creditworthiness of a company.
On August 9, 2019, in a unanimous decision (written by a former bankruptcy judge), the Eighth Circuit Court of Appeals affirmed the confirmation of the Peabody Energy Chapter 11 plan (“Plan”)1 with a prominent backstopped rights offering component.
On June 19, 2019, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) affirmed a ruling of the United States District Court for the District of Delaware (the “District Court”) dismissing challenges by certain first lien creditors of Texas Competitive Electric Holdings LLC (“TCEH”) to the plan distributions and adequate protection payments made during TCEH’s bankruptcy case.
In Mission Product Holdings, the Supreme Court Endorses “Rejection-as-Breach” Rule and Interprets Broadly the Contract Rights that Survive Rejection
Last year, the Supreme Court issued its decision in Merit, unanimously ruling that a buyout transaction between private parties did not qualify for “safe harbor” protection under Bankruptcy Code section 546(e), on the basis that a “financial institution” acted as an intermediary in the overarching transaction.
On March 18, 2019, Judge Stuart M. Bernstein of the United States Bankruptcy Court for the Southern District of New York issued a decision enforcing a mortgage lender’s claim for a prepayment premium (a/k/a make-whole or yield maintenance premium) notwithstanding the lender’s prepetition acceleration of the loan due to the debtor’s default.
We are all accustomed to seeing change of control as a mandatory prepayment event, if not an event of default, under subscription line facilities. Even the strongest sponsors accept that a lender’s analysis of a transaction is based on the current management of the fund, such that any change in control should trigger at least the right to prepayment and cancellation. While there are often points for negotiation, this premise is almost universal.
On November 30, 2018, Judge Nelson S. Román of the United States District Court for the Southern District of New York issued a decision affirming the dismissal of certain claims brought by senior secured creditors against junior secured creditors concerning the alleged breach of standstill and turnover provisions in an intercreditor agreement that governed the creditors’ relationship as creditors with recourse to common collateral. SeeIn re MPM Silicones, LLC, No. 15-CV-2280 (NSR), 2018 WL 6324842 (S.D.N.Y. Nov. 30, 2018) (“Momentive”).