A commercial landlord should never assume that, if his tenant goes into administration or liquidation, he will not be able to obtain rent from the administrator or liquidator in respect of the period following appointment of the administrator or liquidator.

As previously described in our Alert of Oct.

The Office of Fair Trading ("OFT") has announced that it will conduct a review of the corporate insolvency market in the UK. Its aim is to assess the level of competition in the UK market and ensure that the market itself is working well for consumers.

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.

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  

Some of the customers of Farepak, the failed Christmas hamper company that went into liquidation with BDO Stoy Hayward some three years ago, will apparently soon receive their first dividend cheques out of the insolvency. Perhaps even in time for Christmas 2009!

The High Court in England has made an interesting decision in the case of ED Games Limited. A director of that company procured that it did not pay VAT for a period prior to its liquidation and in that period, the net deficit on the company's balance sheet increased. The High Court has held that the director could be held personally liable for the increase in such net deficit.

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.