The United States Bankruptcy Court for the District of Delaware recently upheld a secured lender’s claim for a $23.5 million “makewhole” premium (the “Makewhole Claim”) over the heavily litigated objection raised by the unsecured creditors’ committee in In re School Specialty, Inc., No. 13-10125 (KJC) (Apr. 22, 2013).
Chapter 11 of the U.S. Bankruptcy Code provides debtors with a number of tools to restructure comprehensively their debts and other liabilities as well as immediate protection from secured and unsecured creditors.
Under Section 436 of the Internal Revenue Code, a single employer defined benefit plan sponsored by a company in bankruptcy cannot pay any “prohibited payments” (e.g., lump sums, Social Security level income annuity payments) if the plan is less than 100% funded. In June 2012, the IRS issued proposed regulations permitting such a defined benefit plan to be amended to eliminate prohibited payment forms without violating the anti-cutback requirements of Internal Revenue Code Section 411(d)(6) if certain conditions are satisfied.
On July 25, 2012, the Third Circuit issued its decision in In re American Capital Equipment LLC and Skinner Engine Co., 688 F.3d 145 (3rd Cir. 2012), becoming the first circuit court to align itself with numerous district courts that have allowed bankruptcy courts to reject a Chapter 11 plan prior to a confirmation hearing.
In a decision described as the first of its kind, the U.S. Bankruptcy Court of the Southern District of New York ruled that claims based on soft dollar credits issued by Lehman Brothers Inc. (LBI) to numerous investment advisers were not entitled to the special protections afforded to “customer claims” under the Securities Investor Protection Act (SIPA).
Acquirors of branded businesses often acquire prepaid, perpetual, exclusive trademark licenses to use the business’s trademarks.
On July 9, 2012, the U.S. Court of Appeals for the Seventh Circuit issued its decision in Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC (“Sunbeam”). It is a landmark opinion for trademark licensees whose licenses are rejected in bankruptcy by trademark owners.
The ongoing financial peril of Knight Capital provides an opportunity to reflect on steps investors should consider whenever a financial intermediary or counterparty encounters financial difficulties.
On July 9, 2012, the United States Court of Appeals for the Seventh Circuit significantly strengthened the potential ability of licensees to trademarks, international intellectual property, and other rights to continue to enjoy the benefits of their licenses despite a licensor’s bankruptcy.
In Loop 76, LLC, the Bankruptcy Appellate Panel for the Ninth Circuit (the “BAP”) recently held that a bankruptcy court may consider whether a creditor received a third party source of payment (e.g., a guaranty) when determining whether that creditor’s claim is “substantially similar” to other claims for purposes of plan classification under 11 U.S.C. § 1122(a). In re Loop 76, LLC, 465 B.R. 525 (B.A.P. 9th Cir. 2012).