Borrower beware: in times of distress, your credit documents may give your secured lenders an opportunity to “flip” control of your board

Distress happens, even at companies that once appeared financially solid. When it does, the company, its board (which may be controlled by a sponsor in a public or private equity scenario), and its lenders often enter into restructuring discussions in search of a consensual path forward, typically under the terms of a forbearance agreement.

In the matter of Bleecker Property Group Pty Ltd (In Liquidation) [2023] NSWSC 1071, appears to be the first published case that considers the question of whether an order can be made under section 588FF(1)(a) of the Corporations Act 2001 (Cth) by way of default judgment against one defendant where there are multiple defendants in the proceedings.

Key takeaways

This week’s TGIF considers Hundy (liquidator), in the matter of 3 Property Group 13 Pty Ltd (in liquidation) [2022] FCA 1216, in which the Federal Court of Australia granted leave under rule 2.13(1) of the Federal Court (Corporations) Rules 2000 (Cth) (FCCR) for intervening parties to be h

A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit has voided its previous near explicit declaration that make-whole provisions are always unmatured interest, and therefore subject to disallowance under section 502(b) of the Bankruptcy Code in Ultra Petroleum.

Judge Drain has now issued a long-awaited Order on Remand from the Second Circuit’s decision in Momentive Performance Materials determining the appropriate cramdown interest rate applicable to replacement notes issued by Momentive.

A recent chapter 15 decision by Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) suggests that third-party releases susceptible to challenge or rejection in chapter 11 proceedings may be recognized and enforced under chapter 15. This decision provides companies with cross-border connections a path to achieve approval of non-consensual third-party guarantor releases in the U.S.

Background

A recent chapter 15 decision by Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) suggests that third-party releases susceptible to challenge or rejection in chapter 11 proceedings may be recognized and enforced under chapter 15. This decision provides companies with cross-border connections a path to achieve approval of non-consensual third-party guarantor releases in the U.S.

Background

The United States Supreme Court recently declined to review the United States Court of Appeals for the Second Circuit’s opinion in Momentive Performance Materials Inc. v. BOKF, NA. BOKF and Wilmington Trust, indenture trustees for Momentive’s First Lien Notes and 1.5 Lien Notes (which we’ll refer to as the “Senior Notes”) respectively, each submitted certiorari petitions after the Second Circuit held that they were not entitled to receive make-whole premiums following Momentive’s bankruptcy.

What Is a Make-Whole?

Weil Summer Associate David Rybak contributed to this post

In Momentive Performance Materials, the Second Circuit declined to dismiss as equitably moot the appeals of certain noteholders.