Recent Events

The federal district court in New Jersey recently denied an appeal by maritime creditors of Hanjin to lift bankruptcy protections and allow arrest of Hanjin's vessels in and near U.S. ports. The federal district court judge agreed with the bankruptcy judge's grant of blanket protection to Hanjin and directed creditors of Hanjin to file claims in the Korean bankruptcy proceeding. Those claims are now due by October 25, 2016 in the Korean proceedings, according to an amended order issued by the Korean judge.

A number of towage and bunker suppliers in the Hanjin Shipping Co. Ltd. chapter 15 case have requested the intervention of a district court judge to clarify whether the U.S. Bankruptcy Court has authority to "effectively extinguish[] . . . maritime liens" on chartered vessels. The bankruptcy judge has acted to try to preserve Hanjin's assets and ability to continue its business, as he should do. The case concerns roughly $14 billion worth of cargo afloat or held up in container yards across the world. At least 10 vessels are known to be steaming toward U.S.

This past weekend, Hanjin vessels commenced unloading operations on the U.S. West Coast for the first time since Hanjin filed its bankruptcy petition with the Seoul Central District Court in Korea. Vessels have also been reportedly unloading in Japanese and Canadian ports. There is an obvious overriding public interest in having the many millions of dollars worth of cargo resume moving to its various destinations.

Yesterday afternoon in Newark, New Jersey, Judge John K. Sherwood of the U.S. Bankruptcy Court granted Hanjin Shipping Co. Ltd.'s request to recognize its Korean bankruptcy case and to provide U.S. bankruptcy protection to its assets and operations within the United States. However, the U.S. Bankruptcy Court's protection is subject to another hearing on Friday to sort out what arrangements can be made among the various stakeholders.

The Wall Street Journal has recently observed that if Hanjin Shipping Co. Ltd. fails in its attempts to reorganize and emerge from bankruptcy proceedings in Korea, it would represent the largest container shipping company to date to collapse. In the meantime, its creditors have apparently been active in Chinese, Singaporean, and American ports.

Puerto Rico’s financial woes have recently been front and center in financial news. Although a recent decision by the U.S. Supreme Court curtailed Puerto Rico’s ability to enact its own legislation to address its debt situation, late last month President Obama signed into law legislation designed to allow Puerto Rico to restructure its vast public debt, giving new hope to the Commonwealth’s financially strapped public utilities.

Continuing low oil and natural gas commodity prices have led to bargain prices at the pump, but also high tension in many boardrooms. This strain on the industry has resulted in many exploration and production, or “E&P,” companies seeking relief from high debt and reduced revenue in bankruptcy. In recent cases, those E&P companies have sought to reject their midstream gathering agreements, which they deem onerous and unprofitable.

This is the sixth in a series of alerts regarding the proposals made by the American Bankruptcy Institute Commission to Reform Chapter 11 Business Bankruptcies (the “Commission”). This alert covers the Commission’s recommendations regarding Chapter 11 plans of reorganization and Chapter 11 dismissal orders. It discusses the Commission’s proposed changes to plan confirmation and voting procedures, approving settlements contained in the plan, and releasing insiders from liability.

1. Recommended Changes to Confirmation and Voting Requirements.

The confusion over Bitcoin grows in the latest lawsuit brought in a California bankruptcy court by Trustee Mark Kasolas against Marc Lowe, a former employee of HashFast Technologies LLC.

The trustee alleges, among other things, that Lowe received from the bankrupt Bitcoin mining company fraudulent transfers which included 3,000 Bitcoin (“BTC”) in September 2013, valued at approximately $363,861.

Bankruptcy practitioners routinely advise secured creditor clients to file protective proofs of claim in bankruptcy proceedings despite those clients’ ability to ignore bankruptcy proceedings and decline filing claims without imperiling their lien due to the protections afforded by state law foreclosure rights.^[1] But a recent Ninth Circuit decision is causing attorneys and clients to reconsider whether this traditionally conservative approach is simply too risky in Chapter 13 cases. HSBC Bank v. Blendheim (In re Blendheim), No. 13-35412, 2015 WL 5730015 (9th Cir. Oct.