A super-priority debtor-in-possession (“DIP”) lender with a lien on all of the debtor’s assets has no “better claim” to a Chapter 11’s debtor’s leased property than the lessor, held the U.S. Court of Appeals for the Seventh Circuit on Jan. 11, 2018.Banco Panamericano, Inc. v. City of Peoria, 2018 U.S. App. LEXIS 738, *12 (7th Cir. Jan. 11, 2018). According to the court, the “lease between [the debtor] and [the lessor] gave [the debtor] no post-termination property interest” in “installations or structures” on the debtor’s property.Id.

“[T]he largely debt-financed purchase of a family-owned [business] was not a fraudulent [transfer] and did not amount to a violation of the fiduciary duty of the company’s directors,” held the U.S. Court of Appeals for the First Circuit on Dec. 4, 2017. In re Irving Tanning Co., 2017 W.L. 5988834, *1 (1st Cir. Dec. 4, 2017).

“[T]he Bankruptcy Code does not permit [an undersecured] creditor . . . to advance an unsecured claim for post-[bankruptcy] attorneys’ fees,” held the U.S. District Court for the Eastern District of North Carolina on Nov. 27, 2017. Summitbridge Nat’l Invs. Iii v. Faison, 2017 U.S. Dist. LEXIS 195267, *8 (E.D. N. C. Nov. 27, 2017). Affirming the bankruptcy court, the district court agreed that “the Code is most properly interpreted to allow only oversecured creditors to add post-[bankruptcy] attorneys’ fees.” Id., at *10.

“[B]ankruptcy does not constitute a per se breach of contract and does not excuse performance by the other party in the absence of some further indication that the [debtor] either cannot, or does not, intend to perform,” held the Supreme Court of Connecticut in a lengthy opinion on Nov. 21, 2017. CCT Communications, Inc. v. Zone Telecom, Inc., 2017 WL 5477540, *13 (Ct. Nov. 21, 2017) (en banc), superseding 324 Conn. 654, 153 A.3d 1249 (2017). Reversing the trial court, granting the plaintiff’s motion for en banc reconsideration of its earlier Feb.

“Officers and directors of [an operating corporate debtor] have fiduciary duties to the corporation — not the corporation’s creditors” under Texas law, held the U.S. Court of Appeals for the Fifth Circuit on Oct. 27, 2017. In re ATP Oil & Gas Corp., 2017 U.S. App. LEXIS 21337, *7 (5th Cir. Oct. 27, 2017). In affirming the district court’s dismissal of a Chapter 7 bankruptcy trustee’s complaint, the Fifth Circuit rejected the trustee’s breach of fiduciary claims against officers and directors for permitting “the payment of . . .

Venezuela’s initiative is unlikely to set the stage for a restructuring of international obligations in the face of US sanctions.

Key Points:

• US sanctions will prohibit US persons from engaging in a restructuring of Venezuela and PdVSA debts that includes the issuance of “new” long term debt.

• Creditors should expect that enforcement action will follow a default. The outcomes of that enforcement action will affect all stakeholders, whether or not they participate.

Restructuring Announcement

Ruling overturns New York decision rejecting market-based approach.

Key Points:

• Court of Appeals for the Second Circuit requires courts to consider efficient market interest rate, if available, for purposes of chapter 11 “cramdown.”

• Second Circuit decision overturns lower court ruling that used “formula approach” to determine appropriate chapter 11 cramdown interest rate.

The U.S. Court of Appeals for the Third Circuit recently dismissed an appeal from “the sale of legal claims” as “statutorily moot” under Bankruptcy Code (“Code”) § 363(m) because the appellants “had not obtained a stay” of the effectiveness of the sale order pending appeal. In re Pursuit Capital Mgmt., LLC, 2017 U.S. App. Lexis 20889 (3d Cir. Oct. 24, 2017). According to the court, “we cannot give [the appellants] the remedy they seek without affecting the validity of the sale.” Id., at *37.

Relevance

Cross-border debtors gain another tool to use against dissident creditors seeking to disrupt foreign restructuring proceedings.

Introduction

Ultra court clarifies the requirements for classifying a creditor as “unimpaired” under a plan of reorganization.

Key Points:

• Texas bankruptcy court splits from Third Circuit in finding that a creditor must receive everything it is entitled to under non-bankruptcy law in order for the creditor to be “unimpaired.”

• The decision does not require that unsecured creditors receive post-petition interest but provides that they will be “impaired” if they do not