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Delaware Bankruptcy Court Rules that Unsecured Creditors of a Solvent Debtor Are Entitled to Post-Petition Interest at the Federal Judgment Rate, Not the Default Interest Rate

On December 22, 2021, Judge Mary Walrath of the Bankruptcy Court for the District of Delaware held in In re The Hertz Corp. that redemption premiums may potentially qualify as unmatured interest, and that, to the extent that such redemption premiums are unmatured interest on unsecured debt, then creditors would only be entitled to receive the federal judgment rate, not the contractual rate of interest.

USA, Delaware, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP, Coronavirus
To Vote or Not to Vote: Court Holds That “Out of Money” Junior Creditor Barred from Objecting to Plan

In re Fencepost Productions Inc. that even though an assignment of voting rights provision in a subordination agreement was not enforceable in a bankruptcy proceeding, a subordinated creditor nevertheless was barred from participating in proceedings related to a chapter 11 plan and disclosure statement on the basis that the subordinated creditor lacked prudential standing.

USA, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP
Second Circuit’s Lehman Flip Clause Decision Continues the Expansion of the Bankruptcy Code Safe Harbors

On August 11, 2020, the United States Court of Appeals for the Second Circuit affirmed lower court decisions rejecting Lehman Brothers Special Financing Inc.’s (“LBSF”) attempt to recover nearly $1 billion in payments to noteholders and enforcing certain Priority Provisions (defined below) that subordinated payments otherwise payable to LBSF under related swap transactions.

USA, Derivatives, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP, Title 11 of the US Code
No, You’re a Customer: Recent Second Circuit Decision Circumscribes Merit and Preempts State Law Impairment of Safe Harbor Protections in the Wake of a Failed LBO

On December 19, 2019, the United States Court of Appeals for the Second Circuit (the “Second Circuit”) affirmed a ruling of the United States District Court for the Southern District of New York (the “District Court”) dismissing constructive fraudulent conveyance claims brought by representatives of certain unsecured creditors of Chapter 11 debtor Tribune Company (“Tribune”)

USA, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP, Title 11 of the US Code
The Same, Only Better: Eighth Circuit Affirms Peabody Chapter 11 Plan Backstopped Rights Offering Despite Alleged Disparate Creditor Treatment Under Peabody Plan

On August 9, 2019, in a unanimous decision (written by a former bankruptcy judge), the Eighth Circuit Court of Appeals affirmed the confirmation of the Peabody Energy Chapter 11 plan (“Plan”)1 with a prominent backstopped rights offering component.

USA, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP, Debtor, Title 11 of the US Code
Trademark Licensees’ Rights Survive Bankruptcy Rejection

In Mission Product Holdings, the Supreme Court Endorses “Rejection-as-Breach” Rule and Interprets Broadly the Contract Rights that Survive Rejection

USA, Insolvency & Restructuring, Litigation, Trademarks, Cadwalader Wickersham & Taft LLP, Bankruptcy, Fourth Circuit, Seventh Circuit, Circuit court
The District Court in Tribune Circumscribes Merit and Maintains Section 546(e) Safe Harbor Protection for Shareholders in the Wake of a Failed LBO

Last year, the Supreme Court issued its decision in Merit, unanimously ruling that a buyout transaction between private parties did not qualify for “safe harbor” protection under Bankruptcy Code section 546(e), on the basis that a “financial institution” acted as an intermediary in the overarching transaction.

USA, New York, Corporate Finance/M&A, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP, Leveraged buyout
Filling an Enforcement “Make-Whole”: Bankruptcy Court Enforces Prepayment Premium Notwithstanding Prepetition Loan Acceleration

On March 18, 2019, Judge Stuart M. Bernstein of the United States Bankruptcy Court for the Southern District of New York issued a decision enforcing a mortgage lender’s claim for a prepayment premium (a/k/a make-whole or yield maintenance premium) notwithstanding the lender’s prepetition acceleration of the loan due to the debtor’s default.

USA, New York, Banking, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP, Liquidated damages, Second Circuit, US District Court for the Southern District of New York
Whirlpool Corporation v. HHGreg, Inc. (In re HHGregg, Inc.)

(Bankr. S.D. Ind. Dec. 4, 2017)

The bankruptcy court grants the motion to dismiss, finding the defendant’s security interest in the debtor’s assets, including its inventory, has priority over the plaintiff’s reclamation rights. The plaintiff sold goods to the debtor up to the petition date and sought either return of the goods delivered within the reclamation period or recovery of the proceeds from the sale of such goods. Pursuant to 11 U.S.C. § 546(c), the Court finds the reclamation rights are subordinate and the complaint should be dismissed. Opinion below.

USA, Insolvency & Restructuring, Litigation, Stoll Keenon Ogden PLLC, Debtor, United States bankruptcy court
In re Dickson

(Bankr. E.D. Ky. Nov. 22, 2017)

USA, Kentucky, Insolvency & Restructuring, Litigation, Stoll Keenon Ogden PLLC