Chapter 15 of the Bankruptcy Code was enacted in 2005 to create a procedure to recognize an insolvency or debt adjustment proceeding in another country and to, in essence, domesticate that proceeding in the United States. Once a foreign proceeding is “recognized,” a step which cannot be achieved without a foreign representative satisfying various requirements, the foreign representative may obtain certain protections from a United Stated bankruptcy court, including the imposition of the automatic stay to protect the foreign debtor’s property in the United States.
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 - -’.
Tronox Incorporated and certain affiliates (the “Debtors”) emerged from Chapter 11 in February 2011 armed with a new capital structure and operational game plan, but that’s yesterday’s news. The flavor of the month is last Friday’s decision by Justice Allan L.
The worldwide press has been humming that General Motors has finally taken back the pole position from Toyota as the worldwide sales leader. In contrast, stories about the General Motors bankruptcy have mostly stalled since the automaker’s plan of liquidation took effect last March. Until now.
A recent decision by the Third Circuit in the Nortel Group bankruptcy reinforces the worldwide reach of the automatic stay and the narrow scope of the police power exception under section 362(b)(4) of the Bankruptcy Code. In Nortel Networks, Inc. v. Trustee of Nortel Networks U.K. Pension Plan, No. 11-1895 (3d Cir. Dec. 29, 2011), the Third Circuit held that the automatic stay barred U.K. pension claimants from participating in U.K. proceedings meant to determine the debtors’ liability for their affiliate’s pension funding shortfalls.