On Jan. 19, 2019, the U.S. Court of Appeals for the Fifth Circuit vacated a bankruptcy court decision awarding Ultra Petroleum Corp. noteholders $201 million in make-whole payments and $186 million in post-petition interest. Under the note agreement, upon a bankruptcy filing, the issuer is obligated for a make-whole amount equal to the discounted value of the remaining scheduled payments (including principal and interest that would be due after prepayment) less the principal amount of the notes.

"When licensing trademark rights, you need to think about a host of issues at the outset including the impact of a licensor declaring bankruptcy."

The Big Question. What is the effect of rejection of a trademark license by a debtor-licensor? Over the past few years, this blog has followed the Tempnology case out of New Hampshire raising just that issue.

The Weinstein Company Holdings bankruptcy decisions clarify a buyer’s ongoing obligations under contracts purchased in bankruptcy, subject to resolution of appeals.

Executive Summary

Tolstoy warned that “if you look for perfection, you’ll never be content”; but Tolstoy wasn’t a bankruptcy lawyer. In the world of secured lending, perfection is paramount. A secured lender that has not properly perfected its lien can lose its collateral and end up with unsecured status if its borrower files bankruptcy.

The Bottom Line

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.

An official notice from the Judicial Conference of the United States was just published announcing that certain dollar amounts in the Bankruptcy Code will be increased about 6.2% this time for new cases filed on or after April 1, 2019.

The U.S. Court of Appeals for the Eighth Circuit recently affirmed a trial court judgment holding a bank and its principal in contempt and sanctioning them for violating a bankruptcy discharge injunction, based on the findings in a parallel state court proceeding.

In so ruling, the Eighth Circuit held that the state court judgment did not preclude the bankruptcy court’s ability to enforce its own orders.

The Bankruptcy Code (“Code”) permits “a creditor [to] assert an unsecured claim for post-[bankruptcy] attorneys’ fees based on a pre-[bankruptcy] promissory note,” held the U.S. Court of Appeals for the Fourth Circuit on Feb. 8, 2019. SummitBridge Nat’l Investments III, LLC v. Faison, 2019 WL 490573, *2 (4th Cir. Feb. 8, 2019). In a sensible opinion, the Fourth Circuit reversed the lower courts’ disallowance of an undersecured lender’s claim for legal fees. The court thus “join[ed] other federal courts of appeals” with its holding. Id.