This is the fifth in a series of Alerts regarding the proposals made by the American Bankruptcy Institute Commission to Reform Chapter 11 Business Bankruptcies. This alert covers the Commission’s recommendations regarding the now predominant practice of selling substantially all of the debtor’s assets as a going concern, free of all claims, at the outset of a bankruptcy case. The process, known as a “363 Sale” for the Bankruptcy Code section that applies, has been hailed as a job-saving measure and condemned for giving all value to lenders and none to other creditors.

The Supreme Court of Canada, in a decision that has implications for borrowers and lenders alike, particularly where pension funds are involved, has raised some new hurdles for the country’s banks and their business customers and, at the same time, has bolstered protection for lenders of last resort who finance insolvent companies.

The court’s decision in Sun Indalex Finance, LLC v. United Steelworkers, issued earlier this year, addresses critical questions in insolvency law regarding pension funds and DIP financing. 

In a recent decision from the United States Bankruptcy Court of the Southern District of New York by Judge Martin Glenn in theIn re Borders Group, Inc. case, Jefferies was awarded a "Liquidation Fee" even though it was not involved in the actual liquidation of Borders Group, Inc. (the "Debtors" or "Borders"), and was unsuccessful in procuring a going-concern sale for the Borders business. As a result, approximately 400 stores were sold in September of 2011.