Cramdown Plan Stays Suits Against Corporate Parent
The U.S. Court of Appeals for the Fifth Circuit held on March 1, 2013, that a bankruptcy court had not erred in applying a prime plus 1.75 percent interest rate to a secured lender’s $39 million claim under a "cramdown" plan of reorganization. Wells Fargo Bank N.A v. Texas Grand Prairie Hotel Realty, LLC (In the Matter of Texas Grand Prairie Hotel Realty, LLC), __ F.3d __, 2013 WL 776317 (5th Cir. Mar. 1, 2013).
The U.S. Court of Appeals for the Fifth Circuit held on Feb. 28, 2013, that a secured lender’s full credit bid for a Chapter 11 debtor’s assets at a bankruptcy court sale barred any later recovery from the debtor’s guarantors. In re Spillman Development Group, Ltd., ___ F.3d ___, 2013WL 757648 (5th Cir. 2/28/13). A “credit bid” allows a creditor to “offset its [undisputed] claim against the purchase price,” a right explicitly granted by Bankruptcy Code (“Code”) § 363(k). 3 Collier, Bankruptcy, ¶ 363.06[10], at 363-59 (16th rev. ed. 2010).
The U.S. Court of Appeals for the Seventh Circuit, on Feb. 14, 2013, held that an insider of a Chapter 11 partnership debtor cannot avoid the “competition rule” in a new-value reorganization plan. The debtor’s equity owner arranged for his wife, also an “insider,” to contribute new value to obtain the equity of the reorganized debtor. In re Castleton Plaza, LP, — F.3d –––, 2013 WL 537269 at *1 (7th Cir., Feb. 14, 2013).
The SIPC Trustee for Lehman Brothers Inc. ("LBI") and the Joint Administrator of Lehman Brothers International (Europe) ("LBIE") today announced an agreement in principle to resolve all claims, approximately $38 billion in the aggregate, between their respective entities.
The proposed settlement is subject to approval by the bankruptcy court in the United States and the English High Court. According to the LBI Trustee, if approved, "the agreement sets the stage for distributions that will provide 100 percent recovery of customer property."
The United States Supreme Court unanimously[1] held that secured creditors have a statutory right to credit bid their debt at an asset sale conducted under a so-called "cramdown" plan. RadLAX Gateway Hotels, LLC et al., v. Amalgamated Bank (In re River Road Hotel Partners, LLC),__S.Ct.__ No. 11-166, 2012 WL 1912197 (U.S. May 29, 2012).
The United States District Court for the Southern District of New York (the "District Court") on March 29, 2012 held that a bankruptcy court sale order issued under Section 363 of the Bankruptcy Code ("Section 363") could not extinguish state law successor liability personal injury claims brought against the purchaser by third parties injured after the close of the bankruptcy case, but whose injuries arose out of conduct of the debtor prior to its bankruptcy. Morgan Olson LLC v. Frederico (In re Grumman Olson Industries, Inc.), 2012 WL 1038672 (S.D.N.Y. 2012).
In the current economic climate, brokers will find the decision of the High Court in Euroption Strategic Fund Limited v Skandinaviska Enskilda Banker AB[2012] EWHC 584 (Comm) of considerable interest, since it considers the duties of a broker who is conducting a close out and liquidating the position of a client who is in a state of default, in this case for failure to meet margin requirements.
The Court ruled that:
The Supreme Court handed down its judgment in relation to the client money application in the matter of Lehman Brothers International (Europe) (LBIE). The judgment has a number of implications for firms who hold client money, and for firms who hold money with banks and other firms as clients themselves. The complicated and controversial nature of the appeal is reflected in the sharply opposing opinions of the Lords in relation to two of the three issues considered.
On Dec. 21, 2011, the U.S. Bankruptcy Court for the District of New Jersey approved a liquidation plan for collateralized-debt obligation issuer (“CDO”) Zais Investment Grade Limited VII (“ZING VII”). The plan incorporates a settlement between senior noteholders who had initiated the bankruptcy case by filing an involuntary petition against the CDO, and junior noteholders who were appealing the Bankruptcy Court’s April 26, 2011 order granting the involuntary petition.