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ASHINC or Swim Case Study: Lessons for Private Equity Sponsors on Distressed Portfolio Company Risks (Part I: Sponsor Breach of Company Loan Agreement)

In an opinion that mostly flew under the radar in 2021, Judge Christopher Sontchi from the Bankruptcy Court for the District of Delaware (the “Court”) found a private equity sponsor (the “Sponsor”)1 liable (and, in some cases, not liable) under various contractual and tort theories in connection with actions the Sponsor took or did not take in its failed efforts to stave off a potential bankruptcy filing of its portfolio company, Allied Systems Holdings, Inc., now known as ASHINC Corporation (“Allied” or the “Company

USA, Company & Commercial, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, Private equity, Fourth Amendment
Arbitrate? You Can’t Make Me! Rejection Trumps Arbitration, Says Texas Bankruptcy Court

Overview

USA, Arbitration & ADR, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, Federal Arbitration Act 1926 (USA)
The Third Circuit Lets the Katz Out of the Bag: No Sovereign Immunity for California in the Post-Confirmation Venoco Dispute

The Executive Summary provided a short version of the facts. The next few paragraphs provide a longer version, or you can skip to the next section.

USA, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, European Commission, Supreme Court of the United States
Prepetition Claim or Postpetition Claim? The Timing of a Claim When A Debtor’s Prepetition Wrongful Actions Continue Postpetition

Executive Summary

USA, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, Supreme Court of the United States
Administrators can be liable for criminal charges for breaching employment law

Criminal prosecutions for administrators are rare, and rarer still are prosecutions under employment legislation. However, a recent decision has confirmed that an administrator can be prosecuted and personally liable for a failure to notify the Secretary of State of proposed collective redundancies under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA).

United Kingdom, Employment & Labor, Insolvency & Restructuring, Litigation, Gowling WLG
Bankruptcy No Sanctuary Against Government Enforcement Actions: NRA’s Chapter 11 Case Dismissed as Bad Faith Filing

Executive Summary

USA, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, Corporate governance
A Reminder That a 9019 Motion Is Not a Slam Dunk: Bankruptcy Court Denies 9019 Motion After Determining That Approving Certain Findings Required By Settlement Would Amount to Inappropriate Advisory Opinion

Introduction

USA, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, Bankruptcy
Regulation of pre-pack administrations - The new rules

When used correctly, pre-pack administrations can be an effective means of creating an opportunity for the rescue of an insolvent business. However, concerns are regularly expressed about the lack of transparency in the sale process and the potential for poor outcomes for unsecured creditors, particularly where a disposal involves connected parties. These concerns have been exacerbated by some unfavourable media reports about a limited number of high-profile cases, and the speed at which transactions are often required to take place in order to preserve value and jobs.

United Kingdom, Insolvency & Restructuring, Gowling WLG, Coronavirus
The Aftermath of a Complicated Breakup: Third Circuit Holds Stalking Horse Bidder in Terminated Transaction May Assert Potential Administrative Expense Claim Notwithstanding Disallowance of Its Termination Fee

Executive Summary

On March 15, 2021, the Third Circuit Court of Appeals (the “Third Circuit”) held that a stalking horse bidder may assert an administrative expense claim pursuant to section 503(b)(1)(A) of the Bankruptcy Code for costs incurred in attempting to close on an unsuccessful transaction, even when the stalking horse bidder is not entitled to a breakup or termination fee.

USA, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, Due diligence
Officers of Selling Companies May Escape Fiduciary Duty Liability But May Be Required to Return Change of Control Payments if Company is Insolvent Post-Closing (Nine West Part 2)

While there has been much fuss over the recent ruling by the United States District Court for the Southern District of New York in In re Nine West LBO Securities Litigation1 due to its potential ramifications for director liability, as we explored in Part I of our series on this case here, court watchers have paid less attention to the court’s treatment of officer liability and the interes

USA, Insolvency & Restructuring, Litigation, Weil Gotshal & Manges LLP, Private equity, Due diligence