On June 23, 2011, the Supreme Court of the United States issued the decision of Stern v. Marshall, debatably the most important case on bankruptcy court jurisdiction in the last 30 years. The 5-4 decision, written by Chief Justice Roberts, established limits on the power of bankruptcy courts to enter final judgments on certain state law created causes of action.

The Advisory Committee on Bankruptcy Rules recently issued a report to the Standing Committee on Rules of Practice and Procedure on amendments and new rules that were published for comment the previous year. The Advisory Committee’s report recommends substantial revisions to the amendments that were initially proposed to Bankruptcy Rule 2019. The revisions are responsive to the numerous comments, suggestions and objections made by hedge funds, institutional investors and other distressed debt investors.

Background

On 14 October 2009 the Government announced a major change to the way in which company buy-backs of debt will be taxed. The change may be relevant to any corporate debt buy-back where debt is being purchased at less than face value, including the exercise of a post-enforcement call option in a securitisation.

The global financial crisis has resulted in many loans trading at below par value. This presents borrowers with an opportunity to purchase their own debt and, therefore, extinguish the debt at a reduced cost.