An important decision by Judge Kevin Carey of the United States Bankruptcy Court for the District of Delaware recently focused the distressed debt market (and financial creditors in general) on the proper legal characterization of a common financing provision — the “make-whole premium.”¹ Judge Carey allowed a lender’s claim in bankruptcy for the full amount of a large make-whole premium, after denying a motion by the Unsecured Creditors’ Committee to disallow the claim.

 WHY DOES THIS DECISION MATTER?

Companies with certain specific connections to Hong Kong are increasingly likely to fall under Hong Kong jurisdiction and Hong Kong’s Companies Ordinance. Both creditors and debtors will benefit from the clarity provided by the recent judgment in the case Re Pioneer Iron and Steel Group. Hong Kong’s Companies Ordinance expressly provides for the possibility of petitioning to liquidate, or wind-up, companies incorporated outside of Hong Kong.

The U.S. bankruptcy claims trading market has grown in recent years, from one with a few specialized firms investing in small vendor trade claims into a multibillion dollar industry. Major investment banks and hedge funds now regularly buy and sell claims arising from a variety of transactions, including swap terminations, litigation judgments, debt issuances and rejected real estate and equipment leases. With individual claim amounts frequently in the millions (and sometimes billions) of dollars, the volume of claims bought and sold has increased significantly.

On April 1, 2013, Judge Christopher Klein, Chief Judge of the United States Bankruptcy Court for the Eastern District of California, ruled that the City of Stockton, California, could proceed with its chapter 9 bankruptcy filing. Judge Klein’s decision affirmed Stockton’s status as the largest US city (population 300,000) to have successfully sought bankruptcy protection and proceed with bankruptcy.1 Judge Klein’s comments on the record may also signal that the resolution of Stockton’s chapter 9 will require the impairment of the city’s pension obligations.

On January 31, 2013, the Bankruptcy Court for the District of Delaware issued an opinion that approved the confirmation of the proposed plan in In re Indianapolis Downs, LLC.

On November 27, 2012, Judge Shelley C. Chapman of the United States Bankruptcy Court for the Southern District of New York issued an opinion in In re Patriot Coal Corporation1 transferring the chapter 11 proceedings pending before her to the Eastern District of Missouri.

Introduction

Recent bankruptcy appellate rulings have addressed the issue of what rights a trademark licensee has after a debtor-licensor rejects its trademark license in bankruptcy.

In light of the current uncertainty surrounding the rights of trademark licensees when a debtor-licensor seeks to reject the underlying license agreements in bankruptcy, licensees may wish to consider strategies to protect their rights.

In re Exide Technologies5

In 1991, Exide Technologies sold substantially all of its industrial battery business to EnerSys Delaware, Inc. (then known as Yuasa Battery (America), Inc.).