Fulltext Search

Bankruptcy Code § 1129(a)(10) provides that in order for a plan proponent to “cram down” - i.e., force acceptance of - a plan of reorganization on a dissenting class of creditors, at least one impaired class of creditors must vote in favor of the plan. Because a plan is often not accepted by all classes entitled to vote, the ability to procure at least one impaired, accepting class in order to cram down a dissenting class is essential in achieving plan confirmation.

The Bankruptcy Code provides a number of “safe harbors” for forward contracts and other derivatives. These provisions exempt derivatives from a number of Bankruptcy Code provisions, including portions of the automatic stay,1 restrictions on terminating executory contracts,2 and the method for calculating rejection damages.3 The safe harbor provisions also protect counterparties to certain types of contracts from the avoidance actions created under Chapter 5 of the Bankruptcy Code, such as the preference and fraudulent transfer statutes.4

The Issue

The issue is whether the insolvency of a borrower under a non-recourse loan can trigger recourse liability for itself and its “bad boy,” non-recourse carve-out guarantors.

The Issue  

The issue is whether the insolvency of a borrower under a non-recourse loan can trigger recourse liability for itself and its “bad boy,” non-recourse carve-out guarantors.