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The United States District Court for the Southern District of New York upholds rulings with respect to subordination, cramdown and the make-whole dispute

In a memorandum decision dated May 4, 2015, Judge Vincent L. Briccetti of the United States District Court for the Southern District of New York affirmed the September 2014 decision of Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York, confirming the joint plans of reorganization (the “Plan”) in the Chapter 11 cases of MPM Silicones LLC and its affiliates (“Momentive”). Appeals were taken on three separate parts of Judge Drain’s confirmation decision, each of which ultimately was affirmed by the district court:

USA, New York, Insolvency & Restructuring, Litigation, A&O Shearman
New ISDA Protocol will limit buy-side remedies in a financial institution failure

The ISDA 2014 Resolution Stay Protocol, published on November 12, 2014, by the International Swaps and Derivatives Association, Inc. (ISDA),1 represents a significant shift in the terms of the over-the-counter derivatives market.

Global, Derivatives, Insolvency & Restructuring, Ropes & Gray LLP, Buy side, International Swaps and Derivatives Association
Southern District of New York holds in Madoff that the Bankruptcy Code cannot be used to recover extraterritorial transfers

Dealing a major blow to the trustee’s efforts to recover fraudulent transfers on behalf of the bankruptcy estate of the company run by Bernard Madoff, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York held in SIPC v. Bernard L. Madoff Investment Securities LLC1 that the Bankruptcy Code cannot be used to recover fraudulent transfers of funds that occur entirely outside the United States.

USA, New York, Capital Markets, Insolvency & Restructuring, Litigation, White Collar Crime, A&O Shearman, Extraterritoriality, Title 11 of the US Code
Ninth Circuit widens circuit split over application of state or federal bankruptcy law to determine whether claims of insider-lenders should be recharacterized as equity

In an important decision for private equity sponsors and other insiders who advance loans to their businesses, on April 30, 2013, the Ninth Circuit Court of Appeals in In re Fitness Holdings International confirmed that bankruptcy courts may recharacterize debt as equity, but held that recharacterization is determined by state law. In its ruling, the Ninth Circuit joins the U.S. Court of Appeals for the Fifth Circuit in deferring to state law on this issue and explicitly rejects the various federal law based tests that have been adopted by a majority of U.S.

USA, Insolvency & Restructuring, Litigation, Ropes & Gray LLP, Bankruptcy, Debt, Ninth Circuit, United States bankruptcy court, Fifth Circuit, Bankruptcy Appellate Panel
Qimonda ruling protects licensees of U.S. patents, holding that application of German insolvency law to cancel licenses is “manifestly contrary” to U.S. public policy

In a case of first impression, a U.S. bankruptcy court charged with enforcing the rights of a foreign insolvency administrator against assets in the United States has held that foreign insolvency law may not be invoked to cancel the rights of licensees of U.S. patents.

USA, Insolvency & Restructuring, Litigation, Patents, Ropes & Gray LLP, Royalty payment, Bankruptcy, Debtor, Substantive law, Title 11 of the US Code, United States bankruptcy court