A "roller-coaster ride of financial and economic uncertainty" would be one way to describe 2011. Limiting the script to financial and economic developments, however, would leave a big part of the story untold, as we chronicle the (not so certain) aftermath of the Great Recession. Impacting worldwide financial and economic affairs in 2011 was a seemingly endless series of groundbreaking, thought-provoking, and sometimes cataclysmic events, including:
Much attention in the commercial bankruptcy world has been devoted recently to judicial pronouncements concerning whether the practice of senior creditor class “gifting” to junior classes under a chapter 1 1 plan violates the Bankruptcy Code’s “absolute priority rule.” Comparatively little scrutiny, by contrast, has been directed toward significant developments in ongoing controversies in the courts regarding the absolute priority rule outside the realm of senior class gifting— namely, in connection with the “new value” exception to the rule and whether the rule was written out of the Bankr
The enduring impact of the Great Recession on businesses, individuals, municipalities, and even sovereign nations has figured prominently in world headlines during the last three years. Comparatively absent from the lede, however, has been the plight of charitable and other nonprofit entities that depend in large part on the largesse of donors who themselves have been less able or less willing to provide eleemosynary institutions with badly needed sources of capital in the current economic climate.
When a company that has been designated a responsible party for environmental cleanup costs files for bankruptcy protection, the ramifications of the filing are not limited to a determination of whether the remediation costs are dischargeable claims. Another important issue is the circumstances under which contribution claims asserted by parties coliable with the debtor will be allowed or disallowed in the bankruptcy case. This question was the subject of rulings handed down early in 2011 by the New York bankruptcy court presiding over the chapter 11 cases of Lyondell Chemical Co.
Recently, the United States Bankruptcy Appellate Panel of the Eighth Circuit decided In re EDM Corp.,[1] affirming that a creditor’s priority in collateral may be sacrificed if the debtor’s exact legal name is not exclusively used in the financing statement.
The Eleventh Circuit recently affirmed the avoidance of nearly $2 million in postpetition payments made by debtor Delco Oil, Inc. (the "Debtor") to its petroleum supplier Marathon Petroleum Company, LLC ("Marathon").[1] The Eleventh Circuit held that funds received by Marathon from the Debtor constituted cash collateral that the Debtor had spent without the permission of either its secured lender, CapitalSource Finance ("CapitalSource"), or the bankruptcy court and, therefore, could be avoided under sections 549(a) and 363(c)(2) of the Bankruptcy Code.
We sent to you earlier this week an Alert on "Chrysler Bankruptcy Filing and Preliminary Impact on Suppliers." As we promised, below is an update based upon our review of the case and observations at the hearings.
Essential Supplier Motion
The Court approved treatment of essential suppliers on a temporary basis. Here is a summary of the Interim Order:
Chrysler's bankruptcy filing, which occurred on April 30, has generated considerable activity already. Baker Hostetler has been monitoring closely the Chrysler activity for our supplier clients. We attended the hearing on the first day filings, which were generally ministerial in nature. The court approved joint administration, maintenance of cash management/business forms, enforcement of automatic stay, payment of wages, and honoring of all warranties.