The Express Grain Terminals, LLC (“Express Grain”) bankruptcy is a case study for grain farmers and their crop production lenders. Near the end of corn harvest and during the peak of soybean harvest, many grain farmers in the Mississippi Delta discovered that they faced potential financial ruin as a result of the bankruptcy filing by Express Grain1 on September 29, 2021 (the “Petition Date”).
On Sept. 19, the U.S. District Court for the Eastern District of Virginia entered an order1 adopting the report and recommendation, or R&R, of the chief bankruptcy judge2 approving the fee applications of three law firms in the retail group bankruptcy cases, including the requested national rates.
On September 19, 2022, the District Court for the Eastern District of Virginia entered an Order1 adopting the Report and Recommendation of the Chief Bankruptcy Judge2 approving the fe
In a decision that may encourage continued sales from suppliers to distressed entities, the Eleventh Circuit in Auriga Polymers Inc. v. PMCM2, LLC1 joined the Third Circuit,2 the only other circuit to directly address the issue, in concluding that post-petition payments for the value of goods received by a debtor within 20 days before the petition date, authorized by 11 U.S.C. section 503(b)(9), do not reduce a creditor's "subsequent new value" preference defense.
I. Preferences in a Nutshell
Nature abhors a vacuum. Equipment finance abhors bankruptcy. Whether in securitized or large, single-asset financings, financiers structure transactions to be “bankruptcy remote.” This article will discuss a December 2021 bankruptcy court bench ruling that found certain protective provisions to be unenforceable and describe how those provisions might have been devised to survive the court’s scrutiny.
Chapter 15 of the U.S. Bankruptcy Code provides a streamlined process for recognition (a form of comity) of a foreign insolvency proceeding. However, courts are divided as to whether a foreign debtor must satisfy the general definition of “debtor” as that term is used in section 109(a) of the Bankruptcy Code, which requires a debtor seeking bankruptcy relief to reside or have a domicile, a place of business, or property in the United States.
A bankruptcy court’s recent decision in Bailey Tool & Mfg. Co., et al. v. Republic Bus. Credit (In re Bailey Tool & Mfg. Co.), Adv. No. 16-03025-SGJ (Bankr. N.D. Tex. Dec. 23, 2021) serves as a reminder for lenders that they should avoid certain actions when dealing with distressed borrowers. Specifically, in Bailey, a bankruptcy judge found a lender squarely at fault for its borrower’s bankruptcy and subsequent liquidation, and held the lender liable to the borrower’s bankruptcy estate for various breach of contract, tort, and bankruptcy claims.
Within the past 18 months, two bankruptcy courts have used the same factors, but reached opposite conclusions, about the characterization of two merchant cash advance funding transactions as either a “true sale” or not a “true sale” – and instead, a disguised financing. In doing so, the courts’ decisions confirm the importance of appropriate structuring to achieve true sale treatment.
In 2005, the United States adopted the Model Law on Cross-Border Insolvency, promulgated by the United Nations Commission on Internal Trade, under chapter 15 of the United States Bankruptcy Code. In so adopting, Congress intended chapter 15 “to be the exclusive door to ancillary assistance to foreign proceedings.” H.R.Rep. No. 109–31, at 110–11 (2005). Notwithstanding the express congressional intent, not all courts have required chapter 15 relief as a prerequisite to seeking relief in a pending civil litigation against a debtor.
In an underreported amendment to the Bankruptcy Code, the Small Business Reorganization Act amended §547(b) of the Code to add an explicit requirement for the bankruptcy trustee or debtor in possession to conduct “reasonable due diligence” before filing a preference action. The apparent goal of this amendment to the Bankruptcy Code is to reduce the number of frivolous preference lawsuits pursued by trustees.