As previously described in our Alert of Oct.
The United States Court of Appeals for the Second Circuit held on Nov. 5, 2009, that a creditor was entitled to its post-bankruptcy legal fees incurred on a pre-bankruptcy indemnity agreement. Ogle v. Fid. & Deposit Co. of Md., __F.3d __, No. 09-0691-bk, 2009 U.S. App. LEXIS 24329 (2d Cir. Nov. 5, 2009). Affirming the lower courts, the Second Circuit explained that the Bankruptcy Code (“Code”) “interposes no bar . . . to recovery.” Id. at *8-9 (citing Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S.
On Nov. 10, 2009, a Pennsylvania district court held that secured creditors do not have an absolute right to credit bid1 their debt under the Bankruptcy Code (the “Code”) in an asset sale conducted pursuant to a “cramdown” plan of reorganization that proposes to provide the secured creditors with the “indubitable equivalent” of their claims. In re Philadelphia Newspapers, LLC, Civil Action 09-00178 at 57 (E.D. Pa. Nov. 10, 2009). This decision is on appeal to the Third Circuit Court of Appeals.
Facts
In a decision to be hailed by buyers of distressed debt and bankruptcy claims on the secondary loan market, on Oct. 15, 2009, the New York Court of Appeals (the “Court”), in a fact-specific ruling, held that an assignment of claim does not violate New York’s champerty statute (forbidding trading in litigation claims) if the purpose of the assignment is to collect damages by means of a lawsuit for losses on a debt instrument in which the assignee holds a pre-existing proprietary interest. Trust for the Certificate Holders of the Merrill Lynch Mortgage Investors, Inc.
The Commission has agreed a plan to split Northern Rock into two banks, a “good” and a “bad” one. The “good” bank will carry on the economic activities of Northern Rock and the “bad” one will be an asset management company that will run down the remaining business. The Commission found the UK Government had kept state aid to a minimum in planning the restructuring. Treasury is pleased with the approval, which it says will allow Northern Rock to return to the mortgage markets while the back book of mortgages is managed separately.
FSA has announced a range of measures to help investors who got unsuitable advice or misleading materials relating to Lehman-backed structured products. It has found significant failings and the actions it is taking will apply to all structured products in future:
A Florida bankruptcy court, on Oct. 13, 2009, issued a 182-page decision after a 13-day trial, among other things, avoiding on fraudulent transfer grounds (a) secured subsidiary guarantees of $500 million and (b) $420 million pre-bankruptcy payments. In re Tousa, Inc., et al., Case No. 08-10928; Adv. P. 08-1435 (S.D. Fla. Oct. 13, 2009). The decision is on appeal to the district court.
Relevance
The United States Bankruptcy Court for the Southern District of New York entered an order on Sept. 17, 2009, granting a motion filed by Lehman Brothers Special Financing Inc. (“LBSF”) to compel Metavante Corporation (“Metavante”) to continue to make payments to LBSF under an ISDA Master Agreement.
On April 16, 2009 and April 22, 2009, General Growth Properties, Inc. (“GGP”) and certain of its subsidiaries (the “Debtors”), including many subsidiaries structured as special purpose entities (the “SPE Debtors”), filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York (the “Court”).
The U.S. Court of Appeals for the Seventh Circuit held on May 5, 2009, that a group of secured lenders were fully secured and “entitled to a full recovery” from the debtor despite the bankruptcy court’s improper valuation of the collateral (improved airport terminal space) securing the lenders’ underlying $60 million loan. In re United Airlines, Inc., ___ F.3d ___, 2009 U.S. App. LEXIS 9648 (7th Cir. 5/5/09) (Easterbrook, Ch. J.). The lower courts had valued the lenders’ collateral at $35 million, leaving them with a $25 million unsecured claim.