It is a basic feature of sales under section 363 of the U.S. Bankruptcy Code, that the purchaser takes free and clear of all claims and interests, such claims and interests attach to the proceeds of the sale in accordance with their priorities.

When a portfolio company underperforms, a sponsor may consider various options to address the perceived performance issues, including changes to a portfolio company’s management team, cost structure, capital structure or other parameters, depending on the nature of the issue(s) at hand. When changes in capital structure may be desirable, often in the context of excessive debt and related liquidity issues, a sponsor’s choices may include a consensual workout outside of bankruptcy, or a court-supervised restructuring under Chapter 11 of the U.S.

Bankruptcy courts in the U.S. are widely viewed as favorable fora for debtors, trustees and creditors’ committees to pursue creative and difficult causes of actions against deep-pockets lenders and others in an attempt to augment the resources available for distributions to creditors. In yet another case, however, the District Court for the Southern District of New York (after withdrawing the litigation from the bankruptcy court), recently dismissed many of the claims asserted by the Lehman debtors against J.P. Morgan Chase Bank, N.A.

This is the fifth in a series of Alerts regarding the proposals made by the American Bankruptcy Institute Commission to Reform Chapter 11 Business Bankruptcies. This alert covers the Commission’s recommendations regarding the now predominant practice of selling substantially all of the debtor’s assets as a going concern, free of all claims, at the outset of a bankruptcy case. The process, known as a “363 Sale” for the Bankruptcy Code section that applies, has been hailed as a job-saving measure and condemned for giving all value to lenders and none to other creditors.

Will Congress Finally Act?

This is the fourth in a series of Alerts regarding the proposals made by the American Bankruptcy Institute Commission to Reform Chapter 11 Business Bankruptcies. We discuss here the Commission’s efforts to require that debtor’s management act in a more transparent fashion. For copies of this or any prior articles about the Commission, please contact any BakerHostetler bankruptcy attorney.

This is the fourth in a series of Alerts regarding the proposals made by the American Bankruptcy Institute Commission to Reform Chapter 11 Business Bankruptcies. We discuss here the Commission’s efforts to require that debtor’s management act in a more transparent fashion. For copies of this or any prior articles about the Commission, please contact any BakerHostetler bankruptcy attorney.

Will Congress Finally Act?

This is the third in a series of Alerts regarding the proposals made by the American Bankruptcy Institute’s Commission to Reform Chapter 11 Business Bankruptcies. It covers the Commission’s recommendations about the fiduciary obligations of a Chapter 11 debtor’s directors and officers and proposed changes to typical defenses asserted to state causes of action. For copies of this or any prior articles about the Commission, please contact any BakerHostetler bankruptcy attorney.

Director and Officer Fiduciary Duties in Chapter 11

This is the second in a series of Alerts regarding the proposals made by the American Bankruptcy Institute’s Select Commission to Reform Chapter 11 Business Bankruptcies. It covers the Commission’s recommendations about the paying of “critical vendors” and other unsecured creditors at the very beginning of a bankruptcy case. The Commission’s recommendations are set forth below. For copies of this Alert, or the prior article about the Commission’s recommendations regarding secured lenders, please contact any BakerHostetler bankruptcy attorney.

The U.S. Supreme Court held that a secured creditor in a chapter 7 bankruptcy case is protected from having its lien “stripped off” even if the collateral securing its claim is worth less than the claims asserted by a senior secured creditor; i.e.the junior creditor’s secured claim is completely "out of the money.” The June 1, 2015 decision, Bank of America, N.A. v. Caulkett, reaffirmed the Court’s prior holding in Dewsnup v.

On May 26, the U.S. Supreme Court held that, so long as parties knowingly and voluntarily consent, a bankruptcy court can issue final orders on matters that it otherwise would not have the constitutional authority to decide. In Wellness Int’l Network v. Sharif,¹ a highly anticipated decision, the majority of the Supreme Court delivered a pragmatic opinion that quelled fears stemming from the Court’s 2011 decision in Stern v.