Two recent cases out of the Third Circuit and the Southern District of New York highlight some of the developing formulas US courts are using when engaging with foreign debtors. In a case out of the Third Circuit, Vertivv. Wayne Burt, the court expanded on factors to be considered when deciding whether international comity requires the dismissal of US civil claims that impact foreign insolvency proceedings.

In brief

The Act of 7 August 2023 on the preservation of businesses and the modernization of bankruptcy law, which came into force on 1 November 2023 ("Act"), has been met with great relief and enthusiasm from practitioners and businesses alike. It finally offers alternatives to the systematic bankruptcy of a company that is unable to pay its debts for lack of liquidity, despite the existence of assets or medium-term growth potential.

When a majority of a company’s board approves a tender offer in good faith, can it still be avoided as an actually fraudulent transfer? Yes, says the Delaware Bankruptcy Court, holding that the fraudulent intent of a corporation’s CEO who was a board member and exercised control over the board can be imputed to the corporation, even if he was the sole actor with fraudulent intent.

Background

In brief

On 1 November 2023, the Luxembourg law dated 7 August 2023, issued from Draft Bill No. 6539A on business preservation and modernization of the insolvency law ("Law" or "Reform"), entered into force.

While initial discussions leading to this Reform started about ten years ago¹, the need for suitable instruments to address financial difficulties in businesses was further emphasized by the pandemic, resulting in a notable increase in bankruptcies in Luxembourg since 2021.

Recently, in In re Moon Group Inc., a bankruptcy court said no, but the district court, which has agreed to review the decision on an interlocutory appeal, seems far less sure.

Yes, says the Delaware Bankruptcy Court in the case of CII Parent, Inc., cementing the advice routinely given by bankruptcy counsel to borrowers in default. We always counsel borrower clients in default of the risk associated with lenders taking unilateral actions pre-filing, stripping debtors of valuable options and assets. Thus, we normally recommend to always obtain a forbearance and undertake the preparations required to file a bankruptcy petition immediately upon forbearance termination, although whether or not to file depends on variety of factors that should be considered.

The Second Circuit recently held that a non-party to an assumed executory contract is not entitled to a cure payment (although it may be so entitled if is a third-party beneficiary of the contract). The result would have seemed obvious to bankruptcy practitioners. So, what in the world made the party pursuing payment take this to the Second Circuit? Well, surprisingly, as the Second Circuit decision shows, the answer is not found in the plain text of the Bankruptcy Code. And while it was argued prior to the Supreme Court’s ruling in Bartenwerfer v. Buckley, No. 21-908, 598 U.S.

A mortgage loan repurchase facility (more casually referred to as a "repo") is a financing structure commonly utilized to finance mortgage loans. These facilities are utilized by both residential and commercial mortgage loan originators and aggregators to finance mortgage loans that they originate or acquire. The structure is favored by liquidity providers in the mortgage loan finance arena due to its preferential "safe harbor" treatment under the United States Bankruptcy Code (the "Bankruptcy Code"), as further described below.

Lenders often attempt to limit what a borrower can do outside the ordinary course of business by negotiating contractual protections. Some of these provisions are designed to make the borrowers bankruptcy remote by, for example, requiring the borrower’s Board to include an independent director whose consent is required for a bankruptcy filing. Others, as was the case we discuss here, however, go further by including contractual rights that limit a borrower’s ability to file for bankruptcy without the lender’s consent.

On Sunday, March 12th, the Treasury Department, the FDIC, and the Board of Governors of the Federal Reserve System (Fed) (the Agencies) announced that the New York Department of Financial Services had appointed the FDIC as receiver for Signature Bank, which was closed on March 11th.  Subsequently, the FDIC announced that it had transferred substantially all of the assets and all of the deposits of Signature Bank to the newly created Signature Bridge Bank, N.A.  Early on March 13th, the FDIC announced a similar transfer of assets and deposits to Silicon Valley Bank, N.A., another n