Chapter 15 of the Bankruptcy Code permits a foreign representative of a foreign insolvency proceeding to seek a bankruptcy court’s assistance in an ancillary proceeding upon recognition of the foreign proceeding. Upon recognition, Chapter 15 empowers a bankruptcy court to grant broad relief to a foreign representative to protect the assets of the debtor or the interests of its creditors in the United States.

Credit bidding of debt held by a secured creditor at a sale of collateral under section 363 of the Bankruptcy Code has become commonplace.1 Does a secured creditor have that same ability in a sale under a chapter 11 plan? Most thought so, but according to the Third Circuit Court of Appeals, not always.

Two decisions (one only weeks ago) have held that the scope of Bankruptcy Rule 2019 encompasses “informal committees” of bondholders and that such committees must comply with the extensive disclosure requirements of Bankruptcy Rule 2019.1 In a recent decision, Bankruptcy Judge Christopher Sontchi of the Delaware Bankruptcy Court came out the other way, ruling that such a committee was not a “committee representing more than one creditor” and, consequently, is not subject to Rule 2019.2 In so doing, Judge Sontchi considered but declined to follow the two decisions addressing the same issue:

Elaborating on its Resorts decision of ten years ago concerning payments to shareholders in a public leveraged buyout,1 the Court of Appeals for the Third Circuit recently ruled in In re Plassein Int’l, Corp.2 that the “settlement payment” exemption of section 546(e) of the Bankruptcy Code also insulates selling shareholders in a private LBO from fraudulent transfer liability.

Hedge funds and other investors in debt or equity securities often form unofficial “ad hoc” committees through which they actively participate in chapter 11 cases. Recent decisions affirm that such ad hoc committees must comply with the disclosure requirements of Bankruptcy Rule 2019 – including the nature and amounts of claims or interests held by members and other details. What about a “group” that says it’s a lot less than an ad hoc committee and therefore, outside the Rule?

On August 30, 2008, the United States District Court for the District of Northern Texas issued its ruling on whether Americas Mining Corporation (“AMC”) (and its parent Grupo Mexico) had caused ASARCO LLC (“ASARCO”), a wholly owned subsidiary of Grupo Mexico, to fraudulently transfer stock of Southern Peru Copper Company (“SPCC”) from ASARCO to AMC. The Court determined that AMC was liable for (1) intentional fraudulent transfer, (2) aiding and abetting breach of fiduciary duty under New Jersey law; and (3) civil conspiracy under Arizona law. See ASARCO LLC v.

We sent to you earlier this week an Alert on "Chrysler Bankruptcy Filing and Preliminary Impact on Suppliers." As we promised, below is an update based upon our review of the case and observations at the hearings.

Essential Supplier Motion

The Court approved treatment of essential suppliers on a temporary basis. Here is a summary of the Interim Order:

Chrysler's bankruptcy filing, which occurred on April 30, has generated considerable activity already. Baker Hostetler has been monitoring closely the Chrysler activity for our supplier clients. We attended the hearing on the first day filings, which were generally ministerial in nature. The court approved joint administration, maintenance of cash management/business forms, enforcement of automatic stay, payment of wages, and honoring of all warranties.

On April 8, the Second Circuit Court of Appeals reversed the Bankruptcy Court and concluded that special ERISA “termination premiums” due PBGC are not contingent prepetition claims subject to discharge in a chapter 11 reorganization. Pension Benefit Guar. Corp. v. Oneida, Ltd., 2009 WL 929528 (2d Cir. April 8, 2009), rev’g Oneida Ltd. v. Pension Benefit Guar. Corp., 383 B.R. 29 (Bankr. S.D.N.Y., 2008).