On June 28, 2011, the United States Court of Appeals for the Seventh Circuit became the latest circuit to weigh in on the hotly contested question of whether a debtor can deny a secured creditor the right to credit bid as part of a Chapter 11 plan providing for the sale of assets encumbered by the secured creditor’s liens. InIn re River Road Hotel Partners, LLC,1 the Seventh Circuit upheld the right of secured creditors to credit bid, a decision that runs directly contrary to recent opinions in the Third and Fifth Circuits.

In a long awaited action, the Federal Deposit Insurance Corporation (FDIC) issued a final rule on July 6 which addresses the FDIC's rights and powers as receiver of a nonviable systemic financial company under the orderly liquidation authority provisions of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The United States Court of Appeals for the Seventh Circuit issued its much anticipated decision in In Re River Road Hotel Partners, LLC, __ F.3d __ (7th Cir., June 28, 2011). In the closely watched case, the Seventh Circuit declined to follow the Third Circuit’s decision in Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010), holding instead that secured lenders have the right to credit bid in “free and clear” asset sales where their liens are being stripped, whether those sales occur under section 363 of the Bankruptcy Code or under a chapter 11 plan.

Enron seems like ancient history but the Second Circuit has just issued an important decision in an Enron appeal confirming that the redemption of commercial paper made through DTC is entitled to the Bankruptcy Code § 546(e) exemption for “settlement payments” and, therefore, exempt from attack as preferential transfers. The Second Circuit held that this is so even though the Enron redemption payments were made prior to stated maturity, becoming the first Circuit Court of Appeal to address this issue. Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V.

The Court of Chancery of Delaware ruled that counsel failed to establish "excusable neglect" when it requested additional time to submit an expert witness report after the deadline for that report—as provided for in the court's previously issued scheduling order—had expired.

Make whole premiums sound simple; they are prepayment premiums that are supposed to “make you whole.” More precisely, make whole premiums are intended to protect noteholders (or other debt holders) from the loss of future fixed coupon interest payments due to the early repayment of debt if market interest rates have declined in the interim.

Judge Gold of the United States District Court for the Southern District of Florida entered an Order today granting the motions of the First and Second Lien Lenders (the Lien Lenders) to intervene in the appeal involving the Transeastern Lenders to the 11th Circuit Court of Appeals (the Transeastern Appeal). In so doing, Judge Gold accepted the proposition that the 11th Circuit’s decision on the issue of reasonably equivalent value (the REV Issue) would bind the Lien Lenders.

In Canada, as in the US, corporate debtors are permitted with court approval to obtain DIP financing on a super-priority basis. The Order typically provides protections as hard as a nutshell, including that pension claims cannot crack the shell of protection and are subordinated to the new DIP loan. A recent Canadian decision, however, held that certain pension claims could crack the nut wide open and should be paid ahead of a DIP loan. Re Indalex Limited, 2011 ONCA 265 (Apr. 7, 2011).

Last month we reported on the overwhelming victory of the Transeastern Lenders in their appeal of the decision by the United States Bankruptcy Court for the Southern District of Florida ordering them to disgorge almost $500 million in loan repayments, pre- and post-judgment interest and professional fees (“TOUSA I“1). That update can be found here.

Reversing a controversial decision and judgment of the bankruptcy court, the United States District Court for the Southern District of Florida has held that a group of lenders who received payment in settlement of their defaulted debt from the proceeds of new loans secured by the assets of certain subsidiaries of TOUSA, Inc. which were not themselves liable on that debt, did not receive fraudulent transfers.