On April 23, 2019, the United States District Court for the Southern District of New York, in fraudulent transfer litigation arising out of the 2007 leveraged buyout of the Tribune Company,1 ruled on one of the significant issues left unresolved by the US Supreme Court in its Merit Management decision last year.

Intercreditor agreements--contracts that lay out the respective rights, obligations and priorities of different classes of creditors--play an increasingly important role in corporate finance in light of the continued prevalence of complex capital structures involving various levels of debt. When a company encounters financial difficulties, intercreditor agreements become all the more important, as competing classes of creditors seek to maximize their share of the company's limited assets.

History: In a June 14, 2017, bankruptcy blog titled “Six Degrees of Separation: Use of Bankruptcy Rule 2004 Examination in Connection with Third-Party Litigation“, we reported on what appeared to be a case of first impression that arose in a case pending before United States Bankruptcy Judge Stuart Bernstein in the United States Bankruptcy Court for the Southern Distr

Court:

“You know, every piece of information and fact out there is within six degrees of separation of the debtors’ assets and financial affairs. The question is where do you draw the line?”

4/20/17 Transcript of hearing in In Re SunEdison, Inc., et al, Case No. 16-10992-smb (hereinafter “TR”), page 30 lines 6-11.

On January 17, 2017, in a long-awaited decision in Marblegate Asset Management, LLC v. Education Management Finance Corp.,1 the US Court of Appeals for the Second Circuit held that Section 316 of the Trust Indenture Act ("TIA") does not prohibit an out of court restructuring of corporate bonds so long as an indenture's core payment terms are left intact.

In a recent opinion dated March 29, 2016, the Delaware Bankruptcy Court on remand from, and following the direction of, the Delaware District Court, ruled that only prepetition unpaid invoices may be counted for purposes of the new value defense under 11 U.S.C. § 547(c)(4). The Bankruptcy Court also ruled that the plaintiff Chapter 7 trustee was entitled to prejudgment interest from the date of the filing of the preference avoidance complaint. Further, the District Court, in affirming the Bankruptcy Court on this point, addressed the ordinary course defense under 11 U.S.C.

A recent decision of the United States District Court for the Southern District of New York (the “District Court”), affirming a decision of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”), further enforces the application of the in pari delicto doctrine in cases decided under New York law and confirms that exceptions to its application remain extremely limited.

On December 5, 2013, Judge Steven Rhodes of the US Bankruptcy Court for the Eastern District of Michigan held that the city of Detroit had satisfied the five expressly delineated eligibility requirements for filing under Chapter 9 of the US Bankruptcy Code¹ and so could proceed with its bankruptcy case.