The Supreme Court handed down its decision yesterday on the combined appeals of Nortel GmbH (In Administration) ("Nortel") and Lehman Brothers International (Europe) (In Administration) ("Lehman Brothers") (together, the "Appellants") against the Pensions Regulator ("tPR").

Nearly three years after the High Court decision on the case of BNY Corporate Trustee Services Ltd v Eurosail UK 2007 – 3BL PLC and others was handed down, the case has run its course in the Supreme Court. The case, which considers the correct interpretation of the balance-sheet insolvency test in section 123(2) of the Insolvency Act 1986, is of importance to insolvency practitioners, financial institutions, legal advisers, company directors and companies.  

Court of Appeal decision  

In an important recent decision, United States v. Quality Stores, Inc., et al.,1 in which Pepper represented the prevailing party, the U.S. Court of Appeals for the Sixth Circuit held that supplemental unemployment compensation benefits (SUB payments) paid by a bankrupt company to its former employees were not wages subject to taxation under the Federal Insurance Contributions Act (FICA).

In In reAm. Capital Equip., LLC¹ the Third Circuit addressed the issue of whether a bankruptcy court has the authority to determine at the disclosure statement stage that a Chapter 11 plan is unconfirmable without holding a confirmation hearing. The court held that when a plan is patently unconfirmable, so that no dispute of material fact remains and defects cannot be cured by creditor voting, a bankruptcy court is authorized to convert the case to Chapter 7 without holding a confirmation hearing. Am.

The Pensions Regulator (the “Regulator”) has published a statement setting out its approach to the issuing of financial support directions (“FSDs”) in insolvency situations. The statement is designed to calm fears following the decision in the joined Nortel and Lehman cases that the “super priority” of FSDs could have a negative impact on the corporate rescue and lending industries.

Background

In a unanimous decision, the U.S. Supreme Court held that debtors may not obtain confirmation of a Chapter 11 cramdown plan that provides for the sale of collateral free and clear of a creditor’s lien but does not permit the creditor to credit-bid at the sale. InRadlax Gateway Hotel, LLC et al. v.

The United States Court of Appeals for the Third Circuit recently issued an important decision on the valuation of collateral of secured creditors and “lien-stripping” in Chapter 11 cases. In In re Heritage Highgate, Inc.,¹ the court held that in a Chapter 11 case, the value of a secured creditor’s collateral under §506(a) of the Bankruptcy Code² was the fair market value of the property as established by expert testimony and it was permissible to “strip the lien” of the creditor where it was unsupported by collateral value.

Introduction

Hildyard J’s recent sanctioning of the scheme of arrangement proposed by PrimaCom Holding GmbH (‘’PrimaCom’’), a German incorporated company whose creditors were domiciled outside of the UK, has reaffirmed the extra-territorial jurisdiction of the English courts in respect of schemes of arrangement and confirmed their status as a useful instrument for foreign companies looking to restructure¹.  

The process

The Court of Appeal has confirmed that the costs of complying with Financial Support Directions (“FSDs”) proposed to be issued to certain Nortel and Lehman companies by the Pensions Regulator (“TPR”) qualify as “super priority” administration expenses, payable in priority to unsecured creditors, floating charge holders and the administrators’ own fees.

The question

In the much anticipated decision of Belmont Park Investments PTY Limited v BNY Corporate Trustee Services Limited and Lehman Brothers Special Financing Inc [2011] UKSC 38 the Supreme Court has unanimously dismissed the appeal of Lehman Brothers Special Financing Inc (“LBSF”) and in so doing provided clarification as to the scope and application of the anti-deprivation rule (the “Rule”).