OVERVIEW

In an important decision issued at the end of August, the United States Court of Appeals for the Third Circuit, in In re Tribune Co., Case No. 18-2909 (3d Cir. Aug. 26, 2020), held that subordination agreements need not be strictly enforced when confirming a chapter 11 plan pursuant to the Bankruptcy Code’s cramdown provision in section 1129(b)(1). In its decision, the Third Circuit also encouraged bankruptcy courts to apply “a more flexible unfair-discrimination standard” and set forth eight guiding principles to aid in that effort.

Shareholders in FTSE 250 company TI Fluid Systems yesterday voted down the company’s proposal to pay a £27 million dividend. In a highly unusual move, 57 per cent of shareholders in the motor part manufacturer used their votes to block the dividend payment which had been recommended by the board just four days earlier. It followed critical media coverage of the proposal, which centred on the fact that the company was making the payment while furloughing staff and cutting workers’ pay and would have resulted in a payment of almost £15 million to US private equity firm Bain Capital.

On 28 March 2020, business secretary Alok Sharma announced plans to reform insolvency law to add new restructuring tools, including:

The Chancellor has committed to doing “whatever it takes” to save businesses and workers and, as part of a raft of measures, has pledged to pay 80% of staff kept on by employers.

In a recent decision, In re Philadelphia Entertainment and Development Partners, L.P., No. 14-000255-mdc (Bankr. E.D. Pa. Dec. 31, 2019), the Bankruptcy Court for the Eastern District of Pennsylvania held that state sovereign immunity does not prevent bankruptcy courts from hearing fraudulent transfer claims against states.

On January 13, 2020, the United States Bankruptcy Court for the District of Delaware issued an opinion in In re La Paloma Generating Company, LLC., Case No. 16-12700 [Adv. Pro.

The United States Supreme Court has granted certiorari on an issue that has greatly divided Circuit Courts of Appeal – the question of whether an entity that retains possession of a debtor’s property has an affirmative obligation to return that property to the debtor or trustee immediately upon the filing of the bankruptcy petition or risk being in violation of the automatic stay.

The Supreme Court, in Ritzen Group, Inc. v. Jackson Masonry, LLC,¹ issued an unanimous opinion last week, ruling that the Court of Appeals for the Sixth Circuit correctly denied the ability of creditor Ritzen Group Inc.

The United States District Court for the District of Delaware recently affirmed a Delaware bankruptcy court case that held that the mutuality requirement of section 553(a)¹The case declined to find mutuality in a triangular setoff between the debtor, a parent entity that owed the debtor money, and that entity’s subsidiary, which was a creditor.²