On September 13, 2011, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware granted standing for an equity committee in In re Washington Mutual, Inc. (“WaMu”) to seek “equitable disallowance” of claims held by noteholders that had traded claims after engaging in negotiations with WaMu over the terms of a global restructuring.
In chapter 11 bankruptcy cases, creditors and equity holders with common interests often find it advantageous to pool resources and form an ad hoc group or committee. Because the committee represents a larger amount of claims or interests, it speaks with more authority in the bankruptcy case, and the members are able to save money by sharing the cost of legal and financial advisors.
Introduction
The recent bankruptcy filings by infrastructure companies Connector 2000 Association Inc., South Bay Expressway, L.P., California Transportation Ventures, Inc., and the Las Vegas Monorail Company have tested the structures utilized to implement public-private partnerships (P3s) in the United States in several respects. It is still too early to draw definitive conclusions about the impact of these proceedings on P3 structures going forward, but initial rulings in two of the cases are already focusing the minds of project participants on threshold structuring considerations.
In a decision that reaffirms its previous rulings on the jurisdictional limits of bankruptcy courts, the US Court of Appeals for the Third Circuit recently held in W.R. Grace & Co. v. Chakarian (In re W.R. Grace & Co.)1 that bankruptcy courts lack subject matter jurisdiction over third-party actions against non-debtors if such actions could affect a debtor’s bankruptcy estate only following the filing of another lawsuit.
To promote equal treatment of creditors, the US Congress has armed debtors with the power to bring suit to recover a variety of pre-bankruptcy transfers. Prominent among these is a debtor’s ability under Section 548 of the Bankruptcy Code to recover constructively fraudulent transfers — i.e., transfers made without fair consideration when a debtor is insolvent.
To promote equal treatment of creditors, the US Congress has armed debtors with the power to bring suit to recover a variety of pre-bankruptcy transfers. Prominent among these is a debtor’s ability under Section 548 of the Bankruptcy Code to recover constructively fraudulent transfers — i.e., transfers made without fair consideration when a debtor is insolvent.