Courts and professionals have wrestled for years with the appropriate approach to use in setting the interest rate when a debtor imposes a chapter 11 plan on a secured creditor and pays the creditor the value of its collateral through deferred payments under section 1129(b)(2)(A)(i)(II) of the Bankruptcy Code. Secured lenders gained a major victory on October 20, 2017, when the Second Circuit Court of Appeals concluded that a market rate of interest is preferred to a so-called “formula approach” in chapter 11, when an efficient market exists.

Post-judgment interest is not something most lenders consider when making a loan. In fact, it is not ordinarily the subject of significant analysis even when litigation becomes necessary. Where the United States District Court is the preferred venue, however, parties easily can fall into the quandary of being stuck with the federal statutory post-judgment interest rate, which is currently less than 1% per annum.

In an appeal certified directly from the Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) to the Court of Appeals, the Third Circuit issued a ruling upholding Judge Kevin Gross’s decision that a chapter 11 debtor-employer may reject the continuing terms and conditions of a collective bargaining agreement (“CBA”) under 11 U.S.C. § 1113, despite that the CBA expired post-petition.

The Bankruptcy Court’s Decision

On January 17, 2014, Chief Judge Kevin Gross of the Bankruptcy Court for the District of Delaware issued a decision  limiting the right of a holder of a secured claim to credit bid at a bankruptcy sale. In re Fisker Auto. Holdings, Inc.,  Case No. 13-13087-KG, 2014 WL 210593 (Bankr. D. Del. Jan. 17, 2014). Fisker raises significant issues for lenders who  are interested in selling their secured debt and for parties who buy secured debt with the goal of using the debt to  acquire the borrower’s assets through a credit bid.

The absolute priority rule of Section 1129(b) of the Bankruptcy Code is a fundamental creditor protection in a Chapter 11 bankruptcy case. In general terms, the rule provides that if a class of unsecured creditors rejects a debtor’s reorganization plan and is not paid in full, junior creditors and equity interestholders may not receive or retain any property under the plan. The rule thus implements the general state-law principle that creditors are entitled to payment before shareholders, unless creditors agree to a different result.

On Friday, the California Department of Financial Institutions closed Sonoma Valley Bank, headquartered in Sonoma, California, and appointed the FDIC as receiver.

On Friday, the Office of the Comptroller of the Currency closed Community National Bank at Bartow [http://www.occ.treas.gov/ftp/release/2010-101.htm], headquartered in Bartow, Florida, and Independent National Bank, headquartered in Ocala, Florida, and appointed the FDIC as receiver.

On Friday, the California Department of Financial Institutions closedButte Community Bank, headquartered in Chico, California, and Pacific State Bank, headquartered in Stockton, California, and appointed the FDIC as receiver for the two banks.

On Friday, the Office of Thrift Supervision closed Imperial Savings and Loan Association, headquartered in Martinsville, Virginia, and appointed the FDIC as receiver.

Friday, the Illinois Department of Financial and Professional Regulation, Division of Banking closed Lincoln Park Savings Bank, headquartered in Chicago, Illinois, and the FDIC was appointed receiver.