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
Having trouble reading this email? View it in your browser August 2022 SHARE THIS In this edition of Restructuring Watch, we reflect on: • The first restructuring plan to cram down HMRC. • Recent government reports on certain UK restructuring processes and learnings from the first six-months of the National Security and Investment Act 2021. • Government consultations on a crypto special administration regime and prospective additions to the cross-border recognition and insolvency framework. • A reminder of the recent important milestone in the Galapagos cross-border insolvency battle.
On 30 June 2022, the English court handed down judgment and made a winding-up order in respect of Galapagos S.A., marking an important milestone in an almost three-year cross-border insolvency battle involving the English, German and European courts.
The decision also provides helpful guidance on the application of the Recast European Insolvency Regulation post-Brexit, as well as the extent to which pre-Brexit jurisprudence should still be considered retained in, or relevant to, English law.
Galapagos: The Facts
In this edition of Restructuring Watch, we reflect on the first court decision on the moratorium procedure, some recent schemes and restructuring plans, the lifting of the remaining pandemic-related restrictions for commercial landlords alongside the introduction of the Commercial Rent (Coronavirus) Act 2022 and an extension of the UK directors’ disqualification regime.
Corbin & King: First Judicial Consideration of the CIGA moratorium
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.
Welcome to the first edition of Restructuring Watch from the Akin Gump financial restructuring team in London. These editions will provide short and accessible updates on key legal developments in the European restructuring and insolvency world.
Happy 2022, everyone! It seems fitting to kick off our Make (Whole) a Minute Update series in 2022 with an alert on make-whole. On December 22, 2021, the Bankruptcy Court for the District of Delaware ruled in favor of the Debtor-Hertz on a Motion to Dismiss filed by Debtor-Hertz with respect to make-whole claims and post-petition interest claims filed by public bondholders, with respect to four different series of bonds. In keeping with our theme that it takes about a minute to read our updates, here are the takeaways on the Hertz decision for institutional investors:
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.