The Third Circuit Court of Appeals, in an opinion authored by Judge Thomas Ambro, has reversed two district court opinions and refused to allow a company to use a Chapter 11 bankruptcy filing as a means to reduce interest on its debt obligations. Specifically, the court held that filing for bankruptcy would not excuse a debtor from its obligation for a “make-whole” payment otherwise due to its lenders.

This week’s TGIF considers Re Akron Roads Pty Ltd (in liq) (No 3) in which the Court held that the liquidators had standing to seek a declaration against an insurer arising from the assignment of rights under a policy.

WHAT HAPPENED?

The previous High Court decision

This week’s TGIF considers State of Victoria v Goulburn Administration Services (In Liquidation) and Ors [2016] VSC 654, in which Special Purpose Liquidators were appointed despite a potential conflict arising from their firm having conducted compliance audits of the companies.

Background

On May 4, 2016, the Court of Appeals for the Third Circuit held that a bankruptcy settlement in the form of a tender offer did not violate the principles of the bankruptcy process. See opinion here.

On March 1, 2016, the U.S. Supreme Court heard argument on the seemingly simple question of what “actual fraud” means.  The Court’s decision will have a significant impact on the reach of the exception to discharge under Section 523(a)(2)(A) of the Bankruptcy Code.

A district court judge in the Middle District of Pennsylvania recently vacated a bankruptcy court’s decision allowing rejection of an oil and gas lease under section 365 of the Bankruptcy Code.  The District Court held that a debtor’s oil and gas lease was a conveyance of an interest in real property and not an executory contract or unexpired lease that could be rejected in bankruptcy under Section 365 of the Bankruptcy Code.

In the decision of Re Arcabi Pty Ltd (Receivers & Managers Appointed) (in liq) [2014] WASC 310 the court considered:

• the application of the Personal Property Securities Act 2009 (Cth) (PPSA) to goods being held on a bailment or consignment basis by a company in receivership and liquidation; and
• the receivers’ rights to be indemnified for costs and expenses related to investigating and protecting the property of third parties.

What is the significance?