Sutton 58 Associates LLC v. Pilevsky et al., is a New York case which gets to the heart of the enforceability of classic single-purpose entity restrictions in commercial real estate lending. At issue is how far a third-party may go to cause a violation of a borrower’s SPE covenants, and whether those covenants are enforceable at all.
A Defaulted Construction Loan and Frustrated Attempts to Foreclose:
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.
Last year, a California Bankruptcy Court wiped out $10.2 million in default interest (“DRI”) when it ruled that a 5% DRI was an unenforceable penalty in a Chapter 11 bankruptcy case where the construction lender fully recovered principal, interest, and other costs of collection.
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.
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.
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.