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Treatment of Repo Transactions Under the Bankruptcy Code

The Bankruptcy Code limits in many ways the rights of nondebtors under contracts with a debtor in bankruptcy. There are, however, some crucial exceptions, which Congress deemed important for the orderly function of the securities markets. In particular, agreements governing securities repurchase (or repo) transactions involving a financial institution may be terminated and liquidated notwithstanding the bankruptcy filing of the repo seller.

USA, Insolvency & Restructuring, Kramer Levin Naftalis & Frankel LLP
Federal Reserve Adopts Rule Requiring GSIBs to Amend QFC Transactions to Limit Termination Rights of Counterparties

On September 1, 2017, the Board of Governors of the Federal Reserve System (the Federal Reserve) adopted a rule (the Rule)1 that will require global systemically important U.S. bank holding companies (U.S. GSIBs)2 and most of their subsidiaries to amend a range of derivatives, short-term funding transactions, securities lending transactions and other qualifying financial contracts (QFCs). The required amendments will limit counterparty termination rights related to certain U.S. GSIB resolution and bankruptcy proceedings.

USA, Banking, Derivatives, Insolvency & Restructuring, Sidley Austin LLP, Bankruptcy, Bank holding company, Office of the Comptroller of the Currency (USA), Federal Deposit Insurance Corporation (USA), Federal Reserve (USA), International Swaps and Derivatives Association, Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (USA)
Ultra Decision Awards "Enormous" Make-Whole Amount and Post-Petition Default Interest

On September 21, 2017, the United States Bankruptcy Court for the Southern District of Texas (the Court) held, over the objection of Ultra Petroleum Corp.

USA, Insolvency & Restructuring, Litigation, Sidley Austin LLP, United States bankruptcy court, US District Court for Southern District of Texas
A Pending Supreme Court Ruling Can’t Create a Claim that Doesn’t Currently Exist

The Bottom Line

USA, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP, US District Court for Western District of Pennsylvania
Seventh Circuit Denies Trustee a Second Bite at the Avoidance Apple

The Bottom Line

USA, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP, Seventh Circuit
Setoff and Recoupment in Bankruptcy: A Brief Overview

This article provides a brief overview of the somewhat related doctrines of setoff and recoupment in the Chapter 11 context. Setoff is recognized in the Bankruptcy Code to offset the claims of creditors and the debtor in a bankruptcy proceeding. Recoupment is a common law doctrine of similar effect. Sometimes overlooked by debtors and creditors alike, these doctrines can be of critical consequence in the settling of accounts between a creditor and the bankrupt debtor.

Setoff

USA, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP
The IRS Withdraws Proposed ‘Net Value’ Regulations

The IRS announced in July that it has withdrawn proposed regulations (the net value regulations) that provided guidance regarding corporate formations, reorganizations and liquidations of insolvent corporations. Those regulations, which were proposed in 2005, required the exchange (or, in the case of the liquidation of a subsidiary into its parent, the distribution) of “net value” in order for the transaction to qualify for nonrecognition treatment under the Internal Revenue Code (the Code).

The Net Value Regulations

Net Value in 332 Liquidations

USA, Insolvency & Restructuring, Kramer Levin Naftalis & Frankel LLP, Internal Revenue Service (USA)
Third Circuit Applies More Flexible Standard for WARN Exemption

The Bottom Line:

USA, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP, Worker Adjustment and Retraining Notification Act 1988 (USA), Third Circuit
Delaware Bankruptcy Court Approves Separate Classification and Disparate Gifted Consideration Between General Unsecured Creditors

The Bottom Line

USA, Delaware, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP
Ninth Circuit Joins “Minority” of Courts That Allow Property to be Sold in Bankruptcy Free and Clear of Leaseholds

The Bottom Line

USA, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP, Ninth Circuit, Seventh Circuit