In In re East End Development, LLC, 2013 WL 1820182 (Bankr. E.D.N.Y. Apr.
The Ninth Circuit has joined the majority of Circuit Courts in holding that bankruptcy courts have the authority to recharacterize alleged debts as equity. See Official Comm. of Unsecured Creds. v. Hancock Park Capital II, L.P. (In re Fitness Holdings Int’l, Inc.), No. 11-56677, --- F.3d ----, 2013 WL 1800000 (9th Cir. April 30, 2013). In doing so, the appellate court has explicitly reversed the contrary precedent of In re Pacific Express, Inc., 69 B.R. 112, 115 (B.A.P. 9th Cir. 1986).
In re Big M, Inc., No. 13-10233 (DHS), 2013 WL 1681489 (Bankr. D.N.J. April 17, 2013). In Big M, the Bankruptcy Court for the District of New Jersey (the “Bankruptcy Court”) held that the debtor’s privilege did not pass to the creditors’ committee, even though the creditors’ committee obtained authority to investigate certain of the debtor’s causes of action, because the committee was acting as a fiduciary to creditors as opposed to the debtor’s estate.
Few courts have construed the meaning of “repurchase agreement” as used in the Bankruptcy Code, so the recent HomeBanc1 case out of the United States Bankruptcy Court for the District of Delaware is a must-read for “repo” counterparties. The principal issue in HomeBanc was whether several zero purchase price repo transactions under the parties’ contract for the sale and repurchase of mortgage-backed securities fell within the definition of a “repurchase agreement” in Section 101(47) of the Bankruptcy Code.
The Upstream C Reorganization
In the late 20th century, the IRS made a combination of unrelated decisions resulting in a proliferation of upstream C reorganizations. First was the repeal of the Bausch & Lomb rule, meaning that the equity held by a parent corporation in its subsidiary could count as continuity of interest, thus allowing the liquidation of a subsidiary to be treated as an upstream C reorganization. Second, the invention of the check-the-box regulations made subsidiary liquidations (and hence upstream reorganizations) so much easier.
A problem frequently faced by landlords in the current economic climate is that of tenants who time their entry into administration so that it takes place just after rent payable in advance on a quarter day has fallen due. This growing practice has left landlords frustrated and out of pocket.
LTR 201240017 is the world’s longest letter ruling, 111 pages in PDF format. Not surprisingly, it is a Section 355 ruling. It was issued three-and-a-half months after the original submission, with those dates bridging Christmas and New Year’s Day. There were seven additional submissions from the taxpayer in the interim. The release of the ruling was delayed for a couple of months.
In our last issue, we looked at the implications for out-of-court administrations where the company or directors seek to appoint an administrator under paragraph 22 of Schedule B1 to the Insolvency Act 1986, but then discover that between filing their notice of intention to appoint and their notice of appointment, a winding-up petition has been presented, triggering paragraph 25 of the Schedule. Paragraph 25 prevents the appointment of an administrator under paragraph 22 where there is a pending winding-up petition.
The two most recent decisions of the Supreme Court involving federal taxes illustrate how a conservative approach to statutory interpretation tends to prevail, but only with great effort, and changing constituencies.
Hall v. United States
The outcome of the TOUSA appeal has been much anticipated and closely watched by the lending community, their counsel and advisors, and legal scholars. On May 15, 2012, the Eleventh Circuit Court of Appeals issued its opinion (found here), reversing the District Court for the Southern District of Florida and affirming the Bankruptcy Court for the Southern District of Florida, at least insofar as to the bankruptcy court’s factual findings, but not remedies.