Part 1 – Celsius Bankruptcy
The novel coronavirus COVID-19 pandemic has the potential to impact the U.S. economy at a level which could ultimately rival or surpass the global financial crisis of 2009. Reports from commercial landlords suggest that a majority of retail and restaurant tenants, perhaps as many as 75%, failed to make payments of rent due on April 1st.
Courts are often faced with the situation in which affiliated debtors file for Chapter 11 reorganization and request to have their cases jointly administered. While joint administration does not, without more, cause substantive consolidation of the assets and liabilities of the corporate group, jointly-administered debtors may propose a single plan of reorganization that establishes the recovery for all of the debtors’ creditors.
BACKGROUND
The United States Court of Appeals for the Second Circuit (the “Second Circuit”) recently followed the emerging trend of affording the safe harbor protections of section 546(e) of the Bankruptcy Code (the “Code”) to intermediary financial institutions acting as only conduits in otherwise voidable transactions.
The United States Court of Appeals for the Eleventh Circuit (the “Eleventh Circuit”) has reinstated the controversial 2009 decision of the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) that required a group of lenders to disgorge $421 million as fraudulent conveyances under sections 548 and 550 of the Bankruptcy Code.
The Federal Reserve announced the approval of a final rule to implement the Dodd-Frank resolution plan requirement set forth in Section 165(d) (the “Final Rule”). The Final Rule requires bank holding companies with assets of $50 billion or more and nonbank financial firms designated by the Financial Stability Oversight Council to annually submit resolution plans to the Federal Reserve and the FDIC.
On Tuesday morning, the Federal Deposit Insurance Corporation (“FDIC”) Board unanimously approved two rules regarding resolution planning: one rule for large bank holding companies and nonbank financial companies supervised by the Federal Reserve Board of Governors (“FRB”),1 and the other rule for large banks.2
The FDIC Board approved a final rule on the orderly liquidation process, which was the culmination of a series of rulemaking efforts begun earlier this year. The rule implements several provisions of Title II of the Dodd-Frank Act. Title II establishes an “orderly liquidation authority” (the “OLA”) through which the FDIC can be appointed as receiver and liquidate a covered financial company, such as a bank holding company, whose failure threatens to have serious adverse effects on financial stability in the U.S.
The July 6, 2011 Federal Deposit Insurance Corporation Board of Directors (the “FDIC Board”) meeting marked the changing of the guard from Chairman Sheila Bair to FDIC Vice Chairman Martin Gruenberg. Chairman Bair’s valedictory meeting was not merely ceremonial; it also covered several key developments regarding the timing of a final rule on resolution plans under section 165(d) of Title I and a final rule on the Orderly Liquidation Authority (“OLA”) under Title II.
A. RESOLUTION PLANS/ LIVING WILLS