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Recent decisions concerning the Trust Indenture Act underline the limits on out-of-court restructurings

In two recent cases, the United States District Court for the Southern District of New York has indicated that Section 316(b) of Trust Indenture Act of 19391 (the “TIA”) requires unanimous consent for out-of- court restructurings that impair bondholders’ practical ability to receive payments, even if the bondholders’ technical, legal ability to receive payments remains intact.

USA, Capital Markets, Insolvency & Restructuring, Litigation, Hunton Andrews Kurth LLP, Preliminary injunction, ING Group
Bankruptcy Court in Delaware rules Caesars’ bankruptcy cases belong in Chicago despite involuntary petition in Delaware

In a battle over proper venue for the chapter 11 cases of In re Caesars Entertainment Operating Company, Inc.

USA, Delaware, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Bankruptcy, United States bankruptcy court
Good faith transferee in a fraudulent transfer action can only retain transfers equal to the value it provided to the debtor

The United States Court of Appeals for the Fifth Circuit recently entered an order confirming that when a fraudulent transfer defendant is able to establish a defense pursuant to 11 U.S.C.

USA, Insolvency & Restructuring, Litigation, Hunton Andrews Kurth LLP, Fraud
Virginia LLC update: bankruptcy court refuses to impose fiduciary duty of loyalty on a manager of a Virginia LLC

On November 5, 2014, the United States Bankruptcy Court for the Western District of Virginia issued a noteworthy opinion that runs counter to what many Virginia law practitioners assume to be the common law in Virginia – i.e., that a manager of a Virginia limited liability company owes a fiduciary duty of loyalty to the limited liability company.

USA, Insolvency & Restructuring, Litigation, Hunton Andrews Kurth LLP, Fiduciary, Limited liability company, Duty of care, United States bankruptcy court
Second Circuit holds that equitable mootness doctrine applies to appeals from orders confirming liquidating chapter 11 plans

On October 29, 2014, the United States Court of Appeals for the Second Circuit affirmed the decision of the District Court for the Southern District of New York dismissing as equitably moot appeals filed by three individuals (the “Appellants”) in the chapter 11 case of In re BGI Inc. f/k/a Borders Group, Inc.

USA, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Liquidation, Second Circuit, United States bankruptcy court
District of Delaware attributes value to Debtor’s credit facility in denying a fraudulent transfer claim based on unreasonably small capital despite existing basis for lenders to terminate and subsequent termination of the facility

On September 30, 2014, in In re SemCrude, L.P.,1 the United States District Court for the District of Delaware, affirming the Bankruptcy Court’s decision, held that direct partnership distributions by debtor SemGroup, L.P. (the “Debtor”) and indirect partnership distributions by its general partner, SemGroup G.P., L.L.C., to certain limited and general partners could not be avoided as constructive fraudulent transfers.

USA, Delaware, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Line of credit
Quadrant v. Vertin: duty to maximize value of an insolvent enterprise—business judgment rule applies to interested directors’ “risky” strategy to increase value, even though creditors bear the downside and the controller stands to benefit

In Quadrant Structured Products Company, Ltd. v. Vertin (October 1, 2014), Vice Chancellor Laster clarified the Delaware Chancery Court’s approach to breach of fiduciary duty derivative actions brought by creditors against the directors of an insolvent corporation.

USA, Delaware, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Business judgement rule, Delaware Court of Chancery
Second Circuit holds that a sale by a chapter 15 debtor in a foreign main proceeding of a claim against an obligor located in the U.S. must be reviewed by the U.S. Bankruptcy Court under section 363 of the Bankruptcy Code

On September 26, 2014, the United States Court of Appeals for the Second Circuit, overturning decisions by the Bankruptcy Court and the District Court for the Southern District of New York, held that the Bankruptcy Court was required to review under section 363 of the Bankruptcy Code the transfer of a claim by a chapter 15 debtor with a recognized foreign main proceeding pending in the British Virgin Islands (the “BVI”).1     In a case under chapter 15 of the Bankruptcy Code in which a foreign main proceeding has been recognized, section 1520(a)(2) of the Bankr

USA, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Debtor, Title 11 of the US Code, Second Circuit, United States bankruptcy court
Publication notice in the Wall Street Journal and the Orange County Register may not be sufficient notice to unknown creditors

The United States District Court for the District of Delaware recently entered a Memorandum Opinion (the “District Court Opinion”) concerning the constitutional sufficiency of the publication of the bar date notice in the New Century bankruptcy as it applies to unknown creditors.1 The District Court vacated the Bankruptcy Court’s August 30, 2013,order (the “Constructive Notice Order”), which had approved the constitutional sufficiency of notice to unknown creditors by publication in The Wall Street Journal and the Orange County Register.

USA, Delaware, Insolvency & Restructuring, Litigation, Hunton Andrews Kurth LLP, The Wall Street Journal, United States bankruptcy court
S.D.N.Y. Bankruptcy Court denies claim for make-whole premium and allows cram down of debtors’ chapter 11 plan paying secured creditors below-market interest rates on replacement notes

On August 26, 2014, the Honorable Robert D. Drain, Bankruptcy Judge of the United States Bankruptcy Court for the Southern District of New York, issued several bench rulings (the “Bench Rulings”) in connection with confirmation of a plan of reorganization in the chapter 11 cases of MPM Silicones, LLC, et al.

USA, New York, Insolvency & Restructuring, Litigation, Fried Frank Harris Shriver & Jacobson LLP, Debtor, United States bankruptcy court