Twin rulings by the District Court for the Southern District of New York, the first of which was issued in December 2014 and the second issued on June 23rd of this year, have created great uncertainty in the bond market regarding whether, when and to what extent Section 316(b) of the Trust Indenture Act (the “TIA”) may now be used by minority bondholders to block out-of-court restructurings, notwithstanding that a particular restructuring is consistent with the provisions of the relevant indenture.
Two important and very different decisions regarding public pensions were recently issued by the Supreme Court of Illinois and the Supreme Court of New Jersey. These decisions are significant not only for the workers and taxpayers in these States, but also for the owners and insurers of municipal bonds issued in these States.
ILLINOIS
On April 8, 2015, we distributed a Corporate Alert outlining two important decisions of the US District Court for the Southern District of New York and their potential effects on future debt exchange offers.1 Since then, the Education Management court has issued a final ruling on the following question, as stated by the court in its most recent decision: “does a debt restructuring violate Section 316(b) of the Trust Indenture Act (the Act) when it does not modify any indenture term explicitly governing the right to receive interest or principal on
“[T]hey would sell their possessions and goods and distribute the proceeds to all…” Acts 2:45
The RadioShack bankruptcy case has already drawn the attention of both state and federal regulators for potential privacy violations, and now the company faces a new issue: $43 million worth of unused gift cards.
Texas Attorney General Ken Paxton launched an adversary proceeding in the bankruptcy case seeking a declaratory judgment that any unused gift cards should receive priority up to $2,775 per card under Bankruptcy Code Section 507(a)(7). RadioShack gift cards did not expire and the face of the cards did not disclose an expiration date, the AG told the court.
The claim of an insider lender (“L”) who invested “in a venture with substantial risk” and who loaned it additional funds on a secured basis to salvage its business should not be recharacterized as equity or subordinated on equitable grounds, held the U.S. Court of Appeals for the Tenth Circuit on June 12, 2015. In re Alternate Fuels, Inc., 2015 WL 3635366 (10th Cir. June 12, 2015) (2-1) (“AFI”).
Last month, the Supreme Court announced its decision in Baker Botts LLP v. Asarco LLC. As most readers will be aware, that case involved a dispute over whether debtor’s retained counsel could be compensated for the fees and expenses incurred in the defense of its bankruptcy fee application.
“Our basic point of reference when considering the award of attorney’s fees is the bedrock principle known as the American Rule: Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise,” wrote Clarence Thomas for the majority in last month’s United States Supreme Court decision in Baker Botts L.L.P. et al. v. Asarco LLC, 2015 U.S. LEXIS 3920, 83 U.S.L.W. 4428 (June 15, 2015).
One of the primary business restructuring goals is the adjustment of a company’s burdensome obligations. If a business is going to be reorganized, matching a company’s obligations to its value is key to the rehabilitation and “fresh start” concepts that underpin the Bankruptcy Code.