The United States District Court for the Southern District of New York dismissed an insider preference complaint by Capmark Financial Group Inc. and its affiliates ("Capmark") seeking to recover a $145 million pre-bankruptcy payment from a lender group. Capmark Financial Group Inc. v. Goldman Sachs Credit Partners L.P., __ F. Supp. 2d __, 2013 WL 1420243 (S.D.N.Y. Apr.
The U.S. Bankruptcy Appellate Panel (“BAP”) for the Eighth Circuit held on March 25, 2013, that a lender “lost its possessory lien when it turned the Debtor’s account funds over to the Trustee without first seeking adequate protection.” In re WEB2B Payment Solutions, Inc., _____ B.R. 2013 _____, 2013WL 1188041, *5 (8th Cir. B.A.P. March 25, 2013) (emphasis added).
Chapter 11 creditors’ committees and debtors continue to challenge lenders’ prepayment premiums, commitment fees and post-bankruptcy interest claims in reorganization cases. Nevertheless, courts regularly reject these challenges in well-reasoned decisions.
Chapter 11 creditors' committees and debtors continue to challenge lenders' prepayment premiums, commitment fees and post-bankruptcy interest claims in reorganization cases. Nevertheless, courts regularly reject these challenges in well-reasoned decisions. This Alert focuses on two of these recent decisions:In re Fleetwood Enterprises, Inc., 2012 WL 2017952 (9th Cir.
The United States Court of Appeals for the Eleventh Circuit, on May 15, 2012, reversed a district court's February 2011 decision that lenders were not liable on a fraudulent transfer claim. In re TOUSA, Inc., ___ F.3d ___, 2012 U.S. App. LEXIS 9796 (11th Cir. 5/15/12).[1] It rejected the district court's finding that corporate subsidiaries had received "reasonably equivalent value" when they encumbered their assets to secure a loan made to them and their corporate parent.
MF Global, one of the world's leading broker/dealer firms entered into insolvency proceedings in both the US and the UK on 31 October 2011. US entities MF Global Holdings Ltd. and MF Global Finance USA Inc. filed voluntary petitions for relief under Chapter 11 of the US Bankruptcy Code in the Bankruptcy Court for the Southern District of New York. Also on 31 October, the US Securities Investor Protection Corporation ("SIPC") initiated the liquidation of MF Global, Inc. a jointly registered futures commission merchant and broker-dealer, under the Securities Investor Protection Act ("SIPA").
The United States Supreme Court recently submitted to Congress an amendment to Bankruptcy Rule 2019 dealing with disclosure by groups of hedge funds and other distressed investors in reorganization cases. Unless Congress blocks its passage, which is unlikely, the amendment will become effective on Dec. 1, 2011.1 As shown below, the new rule streamlines and clarifies what had become a frequently litigated disclosure process.
Background
United States District Court Judge Alan S. Gold, on February 11, 2011, reversed a Florida bankruptcy court’s controversial October 2009 fraudulent transfer judgment1 against a group of lenders based on their receipt of a $421 million loan repayment in July 2007. 3V Capital Master Fund, et al., v. Official Committee of Unsecured Creditors of Tousa, Inc., et al, Case No. 10-60017-CIV (S.D. Fla. Feb.
The Bankruptcy Court for the Southern District of New York recently considered the enforceability of claims for "make-whole" amounts and damages for breach of a "no-call" provision. In re Chemtura Corp., No. 09-11233 (Bankr. S.D.N.Y. Oct. 21, 2010) ("Chemtura"). These provisions are generally enforceable outside of bankruptcy, but enforceability in the context of a bankruptcy case is still unclear. In Chemtura, the court did not actually rule on enforceability but approved a settlement that allocated value to creditors on account of a make-whole clause and a no-call provision.
The current cycle of Chapter 11 corporate bankruptcies involves many cases where the debtor seeks to achieve a balance-sheet restructuring by converting debt into equity. When consensus cannot be achieved, junior stakeholders (i.e., second lien creditors, unsecured creditors and/or equity) will often contest plan confirmation on the grounds that the proposed plan provides more than 100% recovery to the senior creditors. Valuation plays the central role in these cases.