The Bankruptcy Court for the District of Delaware has issued a decision concluding that company-paid medical coverage offered as part of an employee severance package is a “retiree benefit” that cannot be unilaterally modified by the company in bankruptcy, except as provided under Section 1114 of the Bankruptcy Code.

In U.S. v. Apex Oil, a three-judge panel of the Seventh Circuit ruled 3-0 that EPA’s cleanup injunction against the corporate successor to a chemical company was not discharged in Chapter 11 because the injunction does not create a right to payment and, consequently, is not a ‘debt’ under the Bankruptcy Code.

The Seventh Circuit U.S. Court of Appeals recently ruled that an environmental clean-up obligation under the Resource Conservation and Recovery Act (“RCRA”) is not dischargeable in bankruptcy, even when the debtor no longer has any internal clean-up operations and would have to contract a third party to provide such services at significant cost.

On August 11, 2009, Judge Gropper of the United States Bankruptcy Court for the Southern District of New York denied motions to dismiss bankruptcy petitions of several special-purpose entity subsidiaries (SPEs) of General Growth Properties, Inc. (GGP) that were solvent, financially healthy companies structured to be remote from the bankruptcy risks of GGP and its other affiliates.

Only twice has the U.S. Supreme Court spoken directly to environmental issues in bankruptcy – until now. Today the Supreme Court ruled that certain claims can in fact be barred by a bankruptcy court's channeling injunction. The case is particularly important in light of the major corporate bankruptcies now under way in the industrial sector, where environmental costs can drive the success or failure of a restructuring.

In the last decade, commercial landlords have favored obtaining from tenants standby letters of credit over security deposits because standby letters of credit provided added security in the event of a tenant’s bankruptcy.

As if buying distressed debt is not challenging enough given the underlying business considerations, the possible, and perhaps likely, bankruptcy filing of your soon-to-be borrower presents a maze of issues the note purchaser should consider before acquiring the debt.

1. Know Your Seller

On April 8, 2009, the United States Court of Appeals for the Second Circuit found that "termination premiums" due under Section 4006(a)(7) of the Employee Retirement Income Security Act ("ERISA") are not "claims" under the Bankruptcy Code and are therefore not dischargeable in bankruptcy.

Last week we alerted clients to the need for a rapid assessment of their exposure to Satyam in the wake of the much-publicized acknowledgement of fraud and mis-reporting of financial results by the company’s founder and former Chairman.

Conventional wisdom was that bankruptcy and insolvency were not major considerations when receiving outsourcing services from reputable, credit-worthy suppliers.