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.

These are just a few of the big high street names which have sought to compromise their obligations to creditors in recent months via a company voluntary arrangement (CVA).

CVAs are designed as a flexible method by which companies can seek to contractually alter their position regarding different creditors – each CVA will be different, but it is typical, for example, for unsecured trade creditors to be treated differently to landlords. It’s worth noting that secured creditors are not bound by a CVA, unless they agree to this.

The Recast Insolvency Regulation (Regulation 2015/848) (“Recast Regulation”) will apply to all member states of the EU (with the exception of Denmark) in relation to insolvency proceedings opened on or after 26 June 2017. The Recast Regulation takes a similar approach to that of the prior EU Insolvency Regulation (Regulation 1346/2000), which came into force in 2002. The Recast Regulation seeks to create a uniform code for insolvency jurisdiction, and cross-border recognition (within the acceding Member States).

The Insolvency Rules 2016 (the 2016 Rules) have effect from 6 April 2016. A key change introduced by the 2016 Rules is a new approach to decision making, including a deemed consent procedure. The new approach is designed to ease the administrative and cost burden in insolvency proceedings, and is summarised below.

Deemed consent

In re GAC Storage Lansing, LLC, No. 11-40944 (Bankr. N.D. Ill., Feb. 27, 2013)

CASE SNAPSHOT

The court denied confirmation of the debtor’s plan, finding that: (i) the debtor failed to demonstrate that it would be able to obtain financing to pay off the balloon payment; (ii) the proposed transfer of new equity to an individual with indirect ownership interest violated the absolute priority rule; and (iii) the plan’s injunction barring actions by the secured creditor against the guarantors was overly broad.

FACTUAL BACKGROUND

In the Matter of: Village at Camp Bowie I, L.P., No. 12-10271 (5th Cir., Feb. 26, 2013)

CASE SNAPSHOT

The United States District Court for the Central District of Illinois has arguably driven the last nail into the coffin of In re Crane, the much criticized decision of the United States Bankruptcy Court for the Central District of Illinois. The coffin was already set in place after the Illinois legislature passed S.B.0016 late last year, which was signed into law by Gov.

In re Geijsel, et al., Case No. 10-43979-11 (Bankr. N.D. Texas, Aug. 24, 2012)

CASE SNAPSHOT

In re Creekside Senior Apartments, LP, 2012 Fed App. 0008P (6th Cir. B.A.P. June 29, 2012)

CASE SNAPSHOT

In a case of first impression, the Sixth Circuit BAP held that, for purposes of valuing collateral under section 506(a) of the Bankruptcy Code, the availability of Low-Income Housing Tax Credits must be considered in valuing a creditor’s secured claim.

FACTUAL BACKGROUND