Earlier this year, we reported on a decision limiting a secured creditor's right to credit bid purchased debt (capping the credit bid at the discounted price paid for the debt) to facilitate an auction in Fisker Automotive Holdings' chapter 11 case.¹ In the weeks that followed, the debtor held a competitive (nineteen-round) auction and ultimately selected Wanxiang America Corporation, rather than the secured creditor, as the w

Large businesses and organizations that self-insure their legally mandated insurance requirements often use “fronting” policies in which the policyholder must reimburse insurers for all losses and expenses paid on the policyholder’s behalf. These policyholders must furnish substantial collateral to secure repayment, typically, enough to pay many years’ worth of actual and anticipated claims. This can amount to hundreds of millions of dollars, and typically exacerbates cash flow and balance sheet problems for policyholders under financial stress.

The United States Bankruptcy Court recently denied confirmation of a bankruptcy plan even though it found that the plan's global settlement was "fair and reasonable."1 Why? Because the plan's releases were too broad and "unreasonable" for many of the constituents. The case provides a pointed lesson to creditors and debtors alike — pay attention to the releases; overdoing it may sink the whole ship.