2011 did not begin with a bang for bankruptcy professionals. Commercial bankruptcy case filings were infrequent and so too were the release (or publication) of major bankruptcy court decisions. The second half of the year was a different story.
About two years ago, decisions were issued by different circuit court of appeals that addressed the fundamental issue of whether a plan proponent can deny a secured creditor the right to credit bid on collateral of the secured creditor when the sale is made pursuant to a plan of reorganization. Both circuit courts, including the Third Circuit in the much heralded Philadelphia Newspapers LLC decision, found that a debtor could deny a secured creditor that opportunity. See In re Philadelphia Newspapers, 599 F.3d 298 (3rd Cir.
News reports in 2011 suggested that municipal bankruptcy filings were frequent and substantial. Each of Central Falls, Rhode Island, Harrisburg, Pennsylvania, and Jefferson County, Alabama filed for bankruptcy protection in the second half of 2011. Even a state-owned local monopoly on (legal) gambling was not safe from financial turmoil in 2011: Suffolk County’s Off-Track Betting Corporation filed for bankruptcy on March 18. Indeed, 2011 seemed to be the year of chapter 9, which governs municipal bankruptcy filings.
Active participants in the derivatives market rely on the Bankruptcy Code safe harbor set forth in section 546(e) in pricing their securities. That provision restricts a debtor’s power to recover payments made in connection with certain securities transactions that might otherwise be avoidable under the Bankruptcy Code. Two high profile cases decided in 2011 addressed challenges to the application of section 546(e). The more widely reported decision (at least outside the bankruptcy arena) was in connection with the Madoff insolvency case. See Picard v.
In a September 7, 2010 article, the Wall Street Journal reported an uptick in bankruptcy claim activity by traders and the desire of the traders to not comply with certain bankruptcy disclosure requirements that applied to “committees.” The Journal highlighted one case where Bankruptcy Judge Brendan Shannon of the Delaware District Court held the following exchange with a lawyer for certain bondholders: “‘Are you a Committee?’ The lawyer began to answer, ‘Well, actually Your Honor, we are a group of - -’.
Introduction
Summary
In a 32 page decision signed January 3, 2012, Judge Walrath of the Delaware Bankruptcy Court ruled that holders of litigation tracking warrants that would be paid out in stock of the debtor were equity instruments, and would be paid out at the same priority as common equity under the bankruptcy plan. Judge Walrath’s opinion is available here (the “Opinion”).
Background
Summary
At approximately 10:15 this morning, Judge Walrath of the Delaware Bankruptcy Court made an oral ruling confirming Washington Mutual's chapter 11 plan of reorganization.
Over the last three and one-half years, hundreds of attorneys and other professionals have worked thousands of hours in an effort to help WAMU obtain a measure of relief from its debts so that it could emerge from bankruptcy protection with the ability to continue to operate. What has emerged from the process is a smaller, leaner company with a greatly reduced debt load.