The United States Second Circuit has issued its ruling in the Momentive Performance Materials casesresolving three separate appeals by different groups of creditors of Judge Bricetti’s judgment in the United States District Court of the Southern District of New York, which affirmed

Good news: structured dismissals have survived Supreme Court scrutiny. Bad news: dismissals may be harder to structure, given yesterday’s 6-2 decision overruling the Third Circuit in Jevic narrowing the context in which they can be approved. We now have guidance on whether or not structured dismissals must follow the Bankruptcy Code’s priority scheme. The short answer is that they must.

The linked Mintz Levin client advisory discusses a recent Third Circuit Court of Appeals ruling that held a “make-whole” optional redemption premium to be due upon a refinancing of corporate debt following its automatic acceleration upon bankruptcy.

Today’s U.S. Supreme Court decision in Commonwealth of Puerto Rico v. Franklin California Tax-Free Trustputs an end to one of Puerto Rico’s multi-pronged efforts to deleverage itself.

A few thoughts on Tuesday’s oral arguments before the U.S. Supreme Court in the litigation over whether Puerto Rico’s Public Corporations Debt Enforcement and Recovery Act, an insolvency statute for certain of its government instrumentalities, is void, as the lower federal courts held, under Section 903 of the U.S. Bankruptcy Code:

A draft of the U.S. Treasury’s proposed debt restructuring legislation began circulating earlier today.  The draft legislation would give Puerto Rico, as well as other U.S. territories, and their municipalities access to U.S. bankruptcy court under a new chapter of the U.S. Bankruptcy Code (so-called “Super Chapter 9”) as well as making Puerto Rico’s instrumentalities (but not Puerto Rico itself) potentially eligible to file for bankruptcy under existing Chapter 9.

It is said that muddy water is best cleared by leaving it be.  The Supreme Court’s December 4 decision to review the legality of Puerto Rico’s local bankruptcy law, the Recovery Act, despite a well-reasoned First Circuit Court of Appeals opinion affirming the U.S. District Court in San Juan’s decision voiding the Recovery Act on the grounds that it conflicts with Section 903 of the U.S. Bankruptcy Code, suggests, at a minimum, that at least four of the Justices deemed the questions raised too interesting to let the First Circuit have the last word.

“Aside from their inconsistency with empirical data, proposals to “reform” the Bankruptcy Code must overcome a more basic reality: The current Code works exceedingly well.”
– LSTA Response

Last week, the Working Group for the Fiscal and Economic Recovery of Puerto Rico gave the broadest hint yet of the next tactic in Puerto Rico’s ongoing quest to deleverage itself.  Although the details have not yet been articulated, Puerto Rico apparently proposes to blend into a single pot several types of distinct taxes currently earmarked to pay or support different types of bonds issued by a number of its legally separate municipal bond issuers, with the hope that the resulting concoction will meet the tastes of a sufficient number of its differing bond creditors to induce them to

One of the primary business restructuring goals is the adjustment of a company’s burdensome obligations.  If a business is going to be reorganized, matching a company’s obligations to its value is key to the rehabilitation and “fresh start” concepts that underpin the Bankruptcy Code.