In a 5-2 decision, the Supreme Court of the United States in Commonwealth of Puerto Rico et al. v. Franklin California Tax-Free Trust et al., 579 U.S. ___ (2016), rejected the Puerto Rico Public Corporation Debt Enforcement and Recovery Act (the “Recovery Act”) as preempted by the Bankruptcy Code on June 13, 2016. The practical implication of the decision is that Puerto Rico is currently without options to restructure its billions of dollars in municipal debt, and the only feasible path forward will most likely have to come from Congress.

The Board of Governors of the U.S. Federal Reserve System (Board) recently proposed a rule (Proposed Rule) that will impact parties to any "qualified financial contract" (QFC), as described below, with a global systemically important banking organization (GSIB) or a GSIB affiliate (together, a covered entity). The Proposed Rule will eliminate certain contractual rights with respect to the QFC when:

the covered entity counterparty is placed in a Federal Deposit Insurance Corporation (FDIC) receivership; or

Addressing a novel issue in In re: International Oil Trading Company, LLC, 548 B.R. 825 (Bankr. S.D. Fla. 2016), the United States Bankruptcy Court for the Southern District of Florida recently denied in part an involuntary debtor’s motion to compel production of communications between the judgment creditor who had filed the involuntary bankruptcy petition and the petitioner’s litigation funder. The Court found that the attorney-client privilege and work product protection were applicable to certain disclosures made to the litigation funder, a non-lawyer third-party.

Essentially all securitization structures utilize a bankruptcy remote entity, a/k/a special purpose entity (“SPE”), to reduce the lenders’ or investors’ exposure to a bankruptcy of the sponsor. A standard feature of SPEs is the appointment of an independent person (director, member, manager) to the body managing the SPEs. That independent person’s consent is required for “major decisions,” one of which is the filing of, or consenting to a bankruptcy of the SPE (hence the court’s reference to them as “blocking directors”).

In most financing transactions, particularly project finance transactions, lenders seek to obtain security over all of a borrower’s assets. One crucial asset that sometimes does not get sufficient attention is insurance proceeds. Lenders are accustomed to ensuring access to the borrower’s insurance coverage through “additional insured” or “loss payee” provisions.

Nearly every day a different E&P company makes an announcement that indicates the company is facing financial distress, insolvency or bankruptcy.  Many of these companies are Operators under Joint Operating Agreements and with each announcement there are likely Non-Operators concerned about the impact these events will have on their non-operated working interests.  Non-Operators should understand their JOA rights and options when their Operator becomes distressed.

You know, there’s never a dull moment when one reports on the regulatory states’ endless and so often fruitless and wrong-headed tinkering with the global economy. So now… let’s talk bail-in.

A recent decision by the U.S. Court of Appeals for the Second Circuit, In re Tribune Company Fraudulent Conveyance Litigation,¹ represents a significant victory for shareholders who may get cashed out in connection with a leveraged transaction that precedes a company bankruptcy.

SEC and FDIC Propose Dodd-Frank Broker-Dealer Resolution Rules

On remand by the First Circuit Court of Appeals, the Federal District Court of Massachusetts found Sun Capital Partners III, LP (“Sun Fund III”) and Sun Capital Partners IV, LP (“Sun Fund IV, and together with Sun Fund III, the “Sun Funds”) liable for the withdrawal liability of Scott Brass, Inc.