Funds Talk: February 2017

Topics covered in this issue include:

On Jan. 17, the U.S. Court of Appeals for the Second Circuit vacated the decision of the District Court for the Southern District of New York in Marblegate Asset Management, LLC v.

From time to time, you may be seeing references to the Uniform Voidable Transactions Act (UVTA). Indeed, since 2014, the law has already been enacted in nine states and introduced in another seven states. If you are wondering what this new law is all about, you should know that it is really a very old law with a new name. The crux of the law is to prevent debtors from escaping their creditors by making transfers of assets to avoid paying their debts. This law has been a key part of debtor-creditor law in the United States and England dating back to the time of the reign of Elizabeth I.

In a recent case arising out of the bankruptcy of the Yellowstone Mountain Club, a private ski club for the ultrawealthy, Blixseth v. Brown (In re Yellowstone Mountain Club, LLC) (9th Cir. Nov. 28, 2016), the Ninth Circuit held that plaintiff needed the bankruptcy court’s permission to bring post-petition claims against the chair of Yellowstone’s Unsecured Creditors Committee (“UCC”).

In a recent decision in the Southern District of New York, the court addressed a challenge to a secured-for-unsecured debt exchange offer that raised and answered a host of questions on the potential vulnerability of offers of this type. In Waxman v. Cliffs Natural Resources (SDNY December 6, 2016), the court dealt with standing to pursue a challenge; TIA §316(b) after Marblegate and MeehanCombs/Caesars; the no-action clause and allegations of conflict of interest of the trustee; the remedies clause; and discrimination against non-QIBs.

On Nov. 17, 2016, the United States Court of Appeals for the Third Circuit issued an important decision in favor of holders of more than $4 billion in secured first and second lien notes issued by Energy Future Intermediate Holding Co. LLC (EFIH), which unwillingly had their secured notes repaid ahead of schedule in bankruptcy without payment of the “make-whole” required under the indentures. In re Energy Futures Holding Co., No. 16-1351 (3d Cir. Nov. 17 2016).

In a three-line order, the Delaware Supreme Court recently affirmed the Court of Chancery’s dismissal of a suit by a creditor against Athilon Capital Corp. and its sole shareholder, Merced Capital Partners, arising from claims of self-interested transactions by Merced. Quadrant Structured Products Company, Ltd. v. Vertin serves as a reminder of the limited recourse of creditors against controlling shareholders of a debtor that is solvent, even in the cases of egregious conduct.

The Facts

Introduction

Background

In the case of Horton v Henry, the Court of Appeal has recently upheld the High Court’s decision that a Trustee in Bankruptcy cannot compel a bankrupt to draw down his pension rights where the bankrupt has not elected to do so.

The facts

The Office of Compliance Inspections and Examinations (OCIE) announced it is examining registrants’ compliance with key whistleblower provisions arising out of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).