A bankruptcy judge in the Southern District of New York recently held that section 546(e) of the Bankruptcy Code does not prevent a debtor’s creditors from bringing state-law fraudulent conveyance actions that challenge a leveraged buyout of the debtor. Weisfelner v. Fund 1 (In re Lyondell Chem. Co.), No. 10-4609 (REG), --- B.R. ----, 2014 WL 118036 (Bankr. S.D.N.Y. Jan. 14, 2014).
TheLehman Brothers bankruptcy court has determined that the contractually specified methodology for conducting the liquidation of a swap agreement is protected by the safe harbor provisions of the bankruptcy, even if the selected methodology would be more favorable to the non-defaulting counterparty than the liquidation methodology that would apply absent the bankruptcy.See Michigan State Housing Dev. Auth. v. Lehman Bros. Deriv. Prods. Inc. (In re Lehman Bros. Holdings Inc.), No. 08-13555, ---B.R.
A New York bankruptcy court, on Dec. 12, 2013, issued a 166-page decision after a 34-day trial, concluding that the spin-off of a highly profitable energy business constituted a fraudulent transfer intended to shield the business from massive environmental liabilities, and awarding damages of up to approximately $14.5 billion.[1]Tronox Inc. et al. v. Kerr McGee et al. (In re Tronox et al.) (Bankruptcy S.D.N.Y. Dec. 12, 2013) (J.
On Sept. 12, 2013, the United States Court of Appeals for the Second Circuit affirmed the bankruptcy court’s decision to deny payment of a make-whole premium (the “Make-Whole Amount”) to bondholders under three separate indentures (the “Indentures”) based on the plain language of those agreements. U.S. Bank Trust Nat’l Ass’n v. AMR Corp. et al. (In re AMR Corp.), __ F.3d __, 2013 WL 4840474 (2d Cir. Sept. 12, 2013) (“In re AMR Corp. II”).
A Western District of New York bankruptcy court has held that the safe harbor provisions of section 546(e) of the Bankruptcy Code apply to leveraged buy-outs of privately held securities. See Cyganowski v. Lapides (In re Batavia Nursing Home, LLC), No. 12-1145 (Bankr. W.D.N.Y. July 29, 2013).
On June 25, 2013, the Bankruptcy Court for the Southern District of New York (the “Court”) issued a memorandum decision in the Lehman Brothers SIPA proceeding1 holding that claims asserted by certain repurchase agreement (“repo”) counterparties (the “Representative Claimants”) did not qualify for treatment as customer claims under SIPA.
A lender’s right to recover a make-whole premium as part of its allowed claim in a bankruptcy case has been the subject of several recent court decisions. A Delaware bankruptcy court recently allowed a make-whole premium of $23.7 million on a $67 million term loan[1] and found that the premium was not “plainly disproportionate” to the creditor’s possible loss. As a result, the make-whole was not an unenforceable penalty under New York law. In re School Specialty, Inc., No. 13-10125, Slip Op. (Bankr. D. Del. Apr. 22, 2013).[2]
Facts
The United States District Court for the Southern District of New York dismissed an insider preference complaint by Capmark Financial Group Inc. and its affiliates ("Capmark") seeking to recover a $145 million pre-bankruptcy payment from a lender group. Capmark Financial Group Inc. v. Goldman Sachs Credit Partners L.P., __ F. Supp. 2d __, 2013 WL 1420243 (S.D.N.Y. Apr.
The U.S. Bankruptcy Appellate Panel (“BAP”) for the Eighth Circuit held on March 25, 2013, that a lender “lost its possessory lien when it turned the Debtor’s account funds over to the Trustee without first seeking adequate protection.” In re WEB2B Payment Solutions, Inc., _____ B.R. 2013 _____, 2013WL 1188041, *5 (8th Cir. B.A.P. March 25, 2013) (emphasis added).
Chapter 11 creditors’ committees and debtors continue to challenge lenders’ prepayment premiums, commitment fees and post-bankruptcy interest claims in reorganization cases. Nevertheless, courts regularly reject these challenges in well-reasoned decisions.