The Bankruptcy Protector

The filing of a bankruptcy petition under any chapter of the Bankruptcy Code creates the ‘automatic stay,’ which prevents creditors from taking any further action against either the debtor or the debtor’s assets during the bankruptcy. Seasoned bankruptcy attorneys know that a violation of the automatic stay is a serious matter and, because of this, appropriately advise their clients on complying with, or enforcing, the stay. However, stay violations can inadvertently occur even when all reasonable and necessary precautions are taken.

The Bankruptcy Protector

As the impact of COVID-19 is felt across the globe, many airlines have grounded their fleet, ceased operating flights, and are potentially in breach of any financial covenants that they may have in their debt or lease documents, if not already in technical insolvency.

If an airline does go into insolvency, what should banks and lessors do to protect their assets? What issues, practical and legal, should they be aware of?

The Warning Signs

At the very end of a recent opinion, the First Circuit seemingly provided guidance on how bondholders can attack the constitutionality of Puerto Rico’s debt restricting act, PROMESA (The Puerto Rico Oversight, Management, and Economic Stability Act). However, the apparent guidance offered by the First Circuit may only be fool’s gold.

A dispute over whether the Federal Energy Regulatory Commission (“FERC”) can order one of Northern California’s largest natural gas and electric companies – Pacific Gas & Electric Company (“PG&E”) – to reject wholesale power purchase contracts (“PPCs”) will be decided by the United States Bankruptcy Court for the Northern District of California (“Bankruptcy Court”), instead of the United States District Court for the Northern District of California (“District Court”).

Bankruptcy Judges cannot impose additional local chapter 13 confirmation requirements beyond those created by Congress, according to the Southern District of Illinois (the “District Court”).

An Official Committee of Unsecured Creditors (“UCC”) often plays an active role in larger, more complex business bankruptcy cases. But what right, if any, does a UCC have to intervene in a bankruptcy adversary proceeding? The First Circuit Court of Appeals recently addressed this very issue in Assured Guaranty Corp., et al. v. The Financial Oversight and Management Board of Puerto Rico, et. al., 17-1831 (1st Cir. Sept. 22, 2017) (“Financial Oversight”) and ultimately held that a UCC does have such a right.

It cannot have escaped the attention of anyone involved in the aviation finance industry that the UK is currently in the process of ratifying the Cape Town Convention (being the Convention on International Interests in Mobile Equipment and related Protocol on Matters Specific to Aircraft Equipment). Here, we will look at that ratification process and consider the principal legal and practical implications for our clients.

Ratification Process

Key2Law (Surrey) LLP -v- De' Antiquis [2011] EWCA Civ 1567

The Court of Appeal issued its long-awaited Judgment in the case of Key2Law (Surrey) LLP -v- De' Antiquis, confirming that businesses which are in administration are not exempted from TUPE.