Postpetition financing provided by pre-bankruptcy shareholders or other "insiders" is not uncommon in chapter 11 cases as a way to fund a plan of reorganization and allow old shareholders to retain an ownership interest in the reorganized entity. The practice is typically sanctioned by bankruptcy courts under an exception—the "new value" exception—to the "absolute priority rule," which prohibits shareholders and junior creditors from receiving any distribution under a plan on account of their interests or claims unless senior creditors are paid in full or agree otherwise.

In Short

The Situation: With effect from 1 December 2020, Her Majesty's Revenue and Customs ("HMRC") ranks ahead of floating charge holders and unsecured creditors with respect to recovering certain pre-insolvency taxes from an insolvent business (Crown preference). Directors can also now incur personal liability for the unpaid taxes of an insolvent company where they are involved in tax avoidance, evasion or phoenixism.

The UK government has published draft regulations providing that sales by administrators to connected persons will be subject to compulsory scrutiny.

Introduction
Bankruptcy Risk Management by Lenders
Pace Industries
Outlook

Introduction

Real estate lenders and borrowers everywhere are trying to figure out what to do with properties that are either sitting vacant or underperforming pre-pandemic expectations. In New York, a number of mezzanine foreclosures have been pursued with varying degrees of success when challenged in court. Some lenders have been shopping their loans, mostly at discounts to par that are not large enough to create substantial deal flow in the marketplace.

Introduction
Disallowance of Claims of Avoidable Transfer Recipients
Firestar Diamond
The Bankruptcy Court's Ruling
Outlook

The Bottom Line

Introduction
Derivative Standing
Dura Automotive
The Bankruptcy Court's Ruling
The McClatchy Company
Outlook

Introduction

Introduction
Cram-Up Through Reinstatement
Indubitable Equivalent Cram-Up
Notable Court Rulings
Outlook

Introduction

The EMEA Determinations Committee's recent bankruptcy determination involving Selecta CDS provides additional insight on the types of chapter 15 filings that are likely to trigger Credit Events.