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.
On January 31, 2013, the Bankruptcy Court for the District of Delaware in In re Indianapolis Downs, LLC1 declined to designate the votes of parties to a post-petition restructuring support agreement (i.e., a lock-up agreement), instead confirming the Debtors’ Modified Second Amended Joint Plan of Reorganization (the “Plan”) based on the votes of such parties.
The U.S. Department of Labor’s Employee Benefits Security Administration announced a proposed rule that would expand its Abandoned Plan Program to include individual account plans, including 401(k) plans, of companies in Chapter 7 bankruptcy (a “Chapter 7 Plan”). Under the current rule, only large financial institutions and other asset custodians can serve as administrators of abandoned plans, and a plan is considered abandoned only after no contributions or distributions have been made for at least 12 months.
In November 2008, Circuit City filed for bankruptcy protection. Circuit City had the same business model as Best Buy: selling electronic equipment in large retail stores. Other retailers with that business model are finding it increasingly difficult to compete with online sales from companies such as Amazon, eBay, or Walmart. Best Buy’s store sales have fallen for the last eight quarters while expenses increase. Although Best Buy has a large cash buffer, many analysts believe it is only a matter of time before Best Buy also files for bankruptcy, perhaps in 2013.
On November 28, 2012, the United States Court of Appeals for the Fifth Circuit published an opinion affirming the bankruptcy court’s ruling that the Mexican Plan of Reorganization (the “Concurso Plan”) of the Mexican glass-manufacturing company, Vitro, S.A.B.
Under Internal Revenue Code (“Code”) section 436, unless a defined benefit pension plan sponsored by a debtor in bankruptcy is fully funded, the plan may not make “prohibited payments” (i.e., lump sum payments or payments in any other form that exceed the monthly amount under a single life annuity). Moreover, the anti-cutback rule in Code section 411(d)(6) prohibits a plan from being amended to eliminate an optional form of benefit.
The Department of Labor (“DOL”) sued the president of several related companies to establish his personal liability for more than $67,000 in employee contributions never remitted to the employer sponsored benefit plans and to prevent him from discharging this liability in his pending personal bankruptcy action. Over a nearly three-year period, the companies withheld but never remitted the employee contributions to the companies’ group health and 401(k) plans (the “Plans”).
A federal court jury in Manhattan returned verdicts on Monday, November 12, largely exonerating the two most senior Reserve Management Company executives in a Securities and Exchange Commission enforcement action accusing them of fraud.
A federal court recently held that two investment funds are not jointly and severally liable for a bankrupt portfolio company’s withdrawal liability to a multiemployer pension plan disagreeing with a 2007 opinion by the Appeals Board of the Pension Benefit Guaranty Corporation (the “PBGC”). The Massachusetts U.S. District Court ruled there was no liability because the investment funds are not “trades or businesses” for purposes of ERISA’s joint and several liability rules.
The administrator for the longstanding schemes of arrangement for the insolvent London Market "KWELM companies" (Kingscroft Insurance Company Limited, Walbrook Insurance Company Limited, El Paso Insurance Company Limited, Lime Street Insurance Company Limited, and Mutual Reinsurance Company Limited), is finally preparing to wrap up. Walbrook and El Paso previously paid all outstanding claims. On September 30, 2012, the remaining three KWELM companies declared their ultimate dividend percentages and sent final "top-up" payments for agreed claims to scheme creditors.