The Supreme Court of the State of Delaware recently reversed a Court of Chancery decision declining to appoint a receiver for a dissolved Delaware corporation, Krafft-Murphy Company, Inc. (Krafft). The Chancery Court determined that a receiver was inappropriate because Krafft had no property for the receiver to distribute to potential tort victims. The Supreme Court disagreed, holding that an unexhausted insurance policy is property of the dissolved company even after its three-year wind-up period under Delaware law.
The Third Circuit in In re KB Toys, Inc.1 recently affirmed a decision of the Delaware District Court, holding that trade claims are subject to disallowance under section 502(d) of the Bankruptcy Code despite their subsequent sale to a third party. This case is of particular interest to investors in distressed debt.
On October 30, 2013, Brazilian oil company OGX Petróleo e Gas Participações SA (OGX) filed for bankruptcy protection (or “judicial reorganization”) in Rio de Janeiro after restructuring discussions between the company and its major creditors ended without agreement. With nearly $5 billion of debt, OGX is the largest and most complex bankruptcy proceeding to be conducted in Latin America and will not only test Brazil’s nascent bankruptcy law, but also presents itself as the latest potential opportunity for distressed investors focused on Latin American emerging markets.
The City of Detroit filed for protection under chapter 9 of the Bankruptcy Code on July 18, 2013,1 becoming the largest municipality to ever file for bankruptcy. Detroit’s bankruptcy filing presents numerous complicated issues, which will be resolved over the course of the case.
The US District Court for the Southern District of New York affirmed an order rejecting an objection to the confirmation of a Chapter 11 Plan of Reorganization for Dynegy, Inc. and Dynegy Holdings, LLC (together, Dynegy) for a lack of standing.
The US Court of Appeals for the Ninth Circuit recently resolved a split within the circuit when it held that a bankruptcy court has the power to recharacterize debt as equity.
The United States District Court for the Northern District of Mississippi denied the motion of defendant ACA Financial Guaranty Corporation (ACA) to dismiss a class action complaint, finding that the issues were previously adjudicated adversely to ACA in the New York Supreme Court where a companion case, Oppenheimer v. ACA Financial Guaranty Corporation, is currently pending.
The United States Bankruptcy Court for the Southern District of New York granted motions to dismiss involuntary Chapter 7 petitions filed against TPG Troy LLC and T3 Troy LLC (the Troy Entities). Petitioners filed numerous actions against the Troy Entities in the United States and Europe to recover money they alleged was owed in connection with the default of payment-in-kind and subordinated notes.
On April 9, 2013, Ambac Financial Group, Inc. (“Ambac”) submitted a proposed settlement with the United States to the U.S. Bankruptcy Court for the Southern District of New York. If approved, the proposed settlement would resolve more than two years of litigation concerning the tax treatment of losses sustained by Ambac in connection with credit default swap contracts entered into during the 2008 financial crisis. The settlement would result in a payment by Ambac to the Government of $101.9 million, as well as possible future additional payments of up to $14.9 million.
In another recent private letter ruling,19 the IRS ruled that an ownership change pursuant to a bankruptcy reorganization plan qualified for an exception to the general rule limiting net operating loss ("NOL") carryforwards under Section 382(a).