Securities Alert February 1, 2016 E&P Restructurings: Focus on Uptiering Transactions By: Jennifer Wisinski, Paul Amiel, Bill Nelson and Kristina Trauger Times are tough, very tough, for many mid-cap and small-cap exploration and production (“E&P”) companies. Crude oil prices have fallen from more than $100/barrel in July 2014 to a twelve-year low of less than $30/barrel in January 2016. Natural gas prices are at a three-year low. The growing consensus is that depressed prices will experience a slow recovery that may continue into the 2020s.

In Castellanos v. Midland Funding, LLC, 15-CV-559 (M.D. Fla. Jan. 4, 2016) the United States District Judge John Steele joined with several of his Middle District of Florida colleagues and held that the Bankruptcy Code preempts the FDCPA with respect to filing time-barred proofs of claim.

In Garfield v. Ocwen Loan Servicing, LLC, 15-527 (2d Cir. Jan. 4, 2016), the Second Circuit Court of Appeals examined whether a debtor who has been discharged in a bankruptcy can sue in a district court under the Fair Debt Collection Practices Act (“FDCPA”), as opposed to seeking relief in the bankruptcy court.

In the case of Domistyle, Inc., 14-41463 (5th Cir. Dec. 29, 2015), the United States Court of Appeal for the Fifth Circuit affirmed an order of the bankruptcy court requiring a secured creditor to reimburse the trustee for expenses paid to preserve real property subject to the creditor’s lien until the debtor’s eventual surrender of the property to the creditor.

The language of Bankruptcy Code § 501(a) is as broad as it is simple.

On November 23, 2015, in the first appellate decision of its kind, the District Court for the Southern District of Florida affirmed a bankruptcy court order to compel chapter 7 debtors to surrender real property by directing the debtors to cease all foreclosure defense. The decision in Failla v. Citibank, N.A. (In re Failla), case no. 15-80328, marks the first decision from a federal appellate court to address the question of whether a bankruptcy court may enter an order directing a debtor to cease defending a mortgage foreclosure suit pending in state court.

Individuals filing for bankruptcy pursuant to Chapter 7 of Title 11 of the United States Code (the "Bankruptcy Code") generally do so to have their debts discharged and receive the proverbial "fresh start."2 The same, however, is not true for corporations.

In Jenkins v. Midland Credit Management, Inc.,^[1]the U.S. Bankruptcy Court for the Northern District of Alabama held that the filing of a proof of claim based on a time-barred debt cannot give rise to a claim for damages under the Fair Debt Collection Practices Act (“FDCPA”), reasoning that any such claim is precluded by the Bankruptcy Code’s comprehensive claims-allowance procedure.

Foreclosure defense and bankruptcy often go hand in hand, but sometimes it seems like the left hand doesn’t talk to the right. This has proven especially common with bankruptcy plans that propose to “surrender” real property encumbered by a mortgage. The term “surrender” is not defined in the bankruptcy code. As a result, lenders and borrowers often interpret the term differently. For example, most lenders interpret surrender to mean not defending a foreclosure.

Sophisticated real estate lenders spend significant amounts of time and energy attempting to insulate themselves from potential bankruptcy filings by their borrowers. A primary reason, which many an experienced real estate lender has found out the hard way, is the risk that a debtor in bankruptcy may “cram down” a plan of reorganization over its lender’s objection. Under a typical cramdown plan, a debtor may stretch out payments to its secured creditor for several years and attempt to replace its negotiated interest rate with a new, below- market rate of interest.