On March 19, 2021, the United States Court of Appeals for the Third Circuit issued a unanimous decision[1] affirming that the mutuality requirement of section 553(a) of the Bankruptcy Code must be strictly construed and, therefore, that triangular setoffs are not permissible in bankruptcy.

The Hungarian National Bank (MNB) has issued its updated management circular for the treatment of outstanding loans affected by legislative moratoria.

In line with the European Banking Authority (EBA) position, the MNB states that it not necessary to automatically qualify a customer loan as being defaulted or restructured (and thus the creation of higher provisions is not necessary) if the loan fell under the Hungarian legislative moratoria for up to nine months prior to the expiry date of the second moratorium on 30 June 2021.

In a decision arising out of Tribune’s 2008 bankruptcy, the United States Court of Appeals for the Third Circuit recently issued a decision affirming confirmation of the media conglomerate’s chapter 11 plan over objections raised by senior noteholders who contended that the plan violated their rights under the Bankruptcy Code by not according them the full benefit of their prepetition subordination agreements with other creditors.

On 1 August 2020, amendments to Act XLIX of 1991 (the Insolvency Code) are scheduled to come into force, which have been designed to promote the cooperation between debtors and creditors in bankruptcies and allow for the use of electronic communications in insolvency procedures.

The key changes contained in the amendments include the following:

Pre-emption right for the Hungarian state

In a bid to assist struggling companies amid the uncertainty brought on by the pandemic, Hungary issued Government Decree No. 249/2020, which amends the Bankruptcy Code and gives companies breathing space while they explore options for rescue.

The changes created by the decree, which came into force on 29 May 2020, will be in effect only during the state of the emergency and include the following:

The U.S. Supreme Court held today in Mission Product Holdings, Inc. v. Tempnology, LLC that a trademark licensee may retain certain rights under a trademark licensing agreement even if the licensor enters bankruptcy and rejects the licensing agreement at issue. Relying on the language of section 365(g) of the Bankruptcy Code, the Supreme Court emphasized that a debtor’s rejection of an executory contract has the “same effect as a breach of that contract outside bankruptcy” and that rejection “cannot rescind rights that the contract previously granted.”

In a recent decision arising out of the Republic Airways bankruptcy, Judge Sean Lane of the United States Bankruptcy Court for the Southern District of New York held that the liquidated damages provisions of certain aircraft leases were improper penalties and, thus, “unenforceable as against public policy” under Article 2A the New York Uniform Commercial Code. In re Republic Airways Holdings Inc., 2019 WL 630336 (Bankr. S.D.N.Y. Feb. 14, 2019).

On February 8, 2019, the United States District Court for the Southern District of Texas, Houston Division, affirmed a Bankruptcy Court order enjoining a claimant from pursuing claims against a debtor’s non-debtor affiliates based upon third-party release and injunction provisions included in the debtor’s confirmed chapter 11 plan. In re CJ Holding Co., 2019 WL 497728 (S.D. Tex. Feb. 8, 2019).

The United States Court of Appeals for the Third Circuit recently issued a 2–1 decision affirming the ruling of the Bankruptcy Court for the District of Delaware, which reconsidered its prior approval of a $275 million termination fee in connection with a proposed merger. In re Energy Future Holdings Corp., No. 18-1109, 2018 WL 4354741, at *14 (3d Cir. Sept. 13, 2018).

On June 20, 2018, Judge Kevin J. Carey of the United States Bankruptcy Court for the District of Delaware sustained an objection to a proof of claim filed by a postpetition debt purchaser premised on anti-assignment clauses contained in transferred promissory notes. In re Woodbridge Group of Companies, LLC, et al., No. 17-12560, at *14 (jointly administered) (Bankr. D. Del. Jun. 20, 2018).