The U.S. Court of Appeals for the Fifth Circuit, on Aug. 16, 2011, affirmed the lower court’s decision authorizing reimbursement of expenses to qualified bidders for a reorganization debtor’s assets. In re Asarco, LLC, 2011 BL 213002 (5th Cir. Aug. 16, 2011). In the court’s view, the debtor provided “a compelling and sound business justification for the reimbursement authority.” Id. at *12.

Facts

On Aug. 30, 2011, the United States Bankruptcy Court for the Southern District of New York approved the disclosure statement with respect to the revised second amended joint Chapter 11 plan of Lehman Brothers Holdings Inc. and its affiliated debtors (the “Debtors”). The order approving the Debtors’ disclosure statement and establishing certain procedures related to the hearing to consider confirmation of the plan (the “order”) can be accessed here.

The United States Bankruptcy Court for the Southern District of New York, overseeing the bankruptcy cases of Lehman Brothers Holdings Inc. (“LBHI”) and its affiliated debtors (collectively, the “Debtors”), entered an order on Aug.

DURING THE PAST YEAR, many investors in the distressed debt market have received postreorganization private equity1 either through a confirmed plan of reorganization or through participation in a rights offering. Unlike publicly traded equity, each new issuance of postreorganization equity leaves recipients, issuers, and agents potentially facing uncharted territory in terms of how the instrument is to trade and settle.

CURRENTLY, NEGOTIATION and documentation of claims trades remain largely unregulated, with only limited oversight from bankruptcy courts and the Securities and Exchange Commission. Generally, the bankruptcy court’s, or the claims agent’s, involvement in claims trading is ministerial, i.e., maintaining the claims register and recording transfers if the form complies with the rule. Only if there is an objection to a claims transfer does the bankruptcy court become involved in the substance of a transfer.

On June 28, 2011, the U.S. Court of Appeals for the Seventh Circuit held that secured creditors have a statutory right to credit bid1 their debt at an asset sale conducted under a "cramdown" plan. In re River Road Hotel Partners, LLC, ___ F.3d. ___, 2011 WL 2547615 (7th Cir. June 28, 2011).2 The Seventh Circuit's decision creates a split with recent decisions in the Third and Fifth Circuits regarding a lender's ability to credit bid its secured debt. See In re Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010); In re Pacific Lumber, Co., 584 F.3d 229 (5th Cir.

The Supreme Court of Canada decision in Century Services Inc. v. Canada (Attorney General), which arose from the restructuring proceedings of Ted LeRoy Trucking Ltd. and was released on December 6, 2010, is a landmark decision in Canadian insolvency law.

In a client update released earlier this month, we discussed the recent decision of the Ontario Court of Appeal in the CCAA proceedings of Indalex Limited. In that case, the Court decided that Indalex’s pension plan wind-up deficiency claims had priority over Indalex’s CCAA secured lender in the context of that case. Of concern is the "chill" that decision may have on secured lending in Ontario to borrowers that sponsor defined benefit pension plans.

This week, the Ontario Court of Appeal surprised many by deciding that in the context of the CCAA proceedings of Indalex, pension plan deficiency claims can have priority over security held by secured DIP lenders. The Court granted priority for the entire wind-up deficiency of two pension plans over the DIP lender’s security. If not reversed on appeal, the ruling creates a potential worst case scenario for secured lenders in Ontario and could affect availability of credit for all employers who provide defined benefit pension plans for their employees.

On September 22, 2010, Bryan Marsal, co-chief executive officer of the restructuring firm Alvarez & Marsal ("A&M") and chief restructuring officer for Lehman Brothers Holdings Inc., presented A&M's State of the Estate report regarding the chapter 11 cases of Lehman Brothers Holdings Inc. and its affiliated debtors (collectively, the "Debtors"). In his overview of the State of the Estate report, Marsal outlined the timeline for plan confirmation, the claims reconciliation process, and recovery analysis:  

Plan Confirmation Timeline