Years ago, second lien lenders adhered to the truism about children -- they were seen but not heard. As our children have grown more vocal in recent years, so too have second lien lenders. A spate of recent bankruptcy cases demonstrate that second lien lenders have been both seen and heard at many critical junctures in the chapter 11 timeline -- at the sale of the debtor’s assets under section 363 of the Bankruptcy Code,1 in seeking the appointment of an examiner,2 when voting on a chapter 11 plan,3 and in connection with the confirmation hearing.4

The rapid evolution of a robust secondary market for claims against the three largest failed Icelandic banks provides a powerful example of the prompt adaptation of an existing secondary-market legal framework -- originally developed in the US and Europe -- to a complex and novel bankruptcy regime and trading environment.

Some legal commentators have lamented the extent to which lenders have been able to use debtor in possession (“DIP”) financing arrangements to gain control over an entire Chapter 11 case.

In the jargon of the secondary bank loan market, loans beneficially owned by participation may be "elevated" to direct assignments once requisite administrative agent and/or borrower consent is obtained. Such "elevations" customarily have been viewed as straightforward transactions -- when completed, the participant simply stands in the shoes of the grantor and becomes the lender of record of the loan on the books of the administrative agent.

Bankruptcy lawyers who are regularly involved in distressed m&a deals have been wondering for the past few months about the potential fallout from Philadelphia Newspapers.

REDMOND v. FIFTH THIRD BANK (October 20, 2010)

COSTELLO v. GRUNDON (October 18, 2010)

In the wake of the recent financial crisis, the legal system continues to sort out rights and obligations of financial market participants. This is especially true for participants in the over-the-counter derivatives markets.

The tremendous growth of that largely unregulated market has been accompanied by the development of sophisticated contractual frameworks and specific bankruptcy legislation expressly intended to reduce uncertainty around the amount and type of claims that could ultimately be asserted by market participants following bankruptcy of a derivative counterparty.

IN RE: RESOURCE TECHNOLOGY CORP. (October 1, 2010)

The chapter 11 case of DBSD North America, Inc. (“DBSD”), f/k/a ICO North America, has been marked by aggressive tactics and extreme positions from its commencement. DBSD, a non-operating satellite communications company, and its second lien noteholders made clear their intent to cram down a plan of reorganization (the “Plan”) on DBSD’s first lien lenders.