As you know from our prior alerts, creditors of borrowers formed as Delaware LLCs (as opposed to corporations) lack standing under Delaware law to sue directors for breaching fiduciary duties even when, to the surprise of many, the LLC is insolvent. See our prior Alert. The disparity of substantive creditor rights depending entirely on corporate form results from two aspects of Delaware law.

Once again, we reflect on the prior year for restructuring trends impacting private credit lenders. Last year it was all about “liability management”—the latest trend in which the limits of sponsor-favorable loan documents are being tested, in some cases past the breaking point.

A common yet contentious liability management strategy is an “uptier” transaction, where lenders holding a majority of loans or notes under a financing agreement seek to elevate or “roll-up” the priority of their debt above the previously pari passu debt held by the non-participating minority lenders. In a recent decision in the Boardriders case, the minority lenders defeated a motion to dismiss various claims challenging an uptier transaction.

In an important decision to private credit lenders, the Fifth Circuit Court of Appeals held that a make-whole premium for an unsecured creditor tied to future interest payments is the “functional equivalent of unmatured interest” and not recoverable under Section 502(b)(2) of the Bankruptcy Code. Ultra Petroleum Corp. v. Ad Hoc Committee of OpCo Unsecured Creditors (In re Ultra Petroleum Corp.), No. 21-20008 (5th Cir. Oct. 14, 2022) (“Ultra”). Ordinarily, the story ends here.

In bankruptcy as in federal jurisprudence generally, to characterize something with the near-epithet of “federal common law” virtually dooms it to rejection.

In January 2020 we reported that, after the reconsideration suggested by two Supreme Court justices and revisions to account for the Supreme Court’s Merit Management decision,[1] the Court of Appeals for the Second Circuit stood by its origina

It seems to be a common misunderstanding, even among lawyers who are not bankruptcy lawyers, that litigation in federal bankruptcy court consists largely or even exclusively of disputes about the avoidance of transactions as preferential or fraudulent, the allowance of claims and the confirmation of plans of reorganization. However, with a jurisdictional reach that encompasses “all civil proceedings . . .

I don’t know if Congress foresaw, when it enacted new Subchapter V of Chapter 11 of the Code[1] in the Small Business Reorganization Act of 2019 (“SBRA”), that debtors in pending cases would seek to convert or redesignate their cases as Subchapter V cases when SBRA became effective on February 19, 2020, but it was foreseeable.

Our February 26 post [1] reported on the first case dealing with the question whether a debtor in a pending Chapter 11 case may redesignate it as a case under Subchapter V, [2] the new subchapter of Chapter 11 adopted by the Small Business Reorganization Act of 2019 (“SBRA”), which became effective on February 19.

Our February 26 post entitled “SBRA Springs to Life”^[1] reported on the first case known to me that dealt with the issue whether a debtor in a pending Chapter 11 case should be permitted to amend its petition to designate it as a case under Subchapter V,^[2] the new subchapter of Chapter 11 adopted by