A recent decision by the U.S. District Court for the Western District of Washington found that certain distressed debt funds were not “financial institutions” under the definition of “Eligible Assignee” in the applicable loan agreement and thus were not entitled to vote on the debtor’s chapter 11 plan of reorganization. The District Court decision affirmed a bankruptcy court decision enjoining loan assignments to the funds and recently denied the funds’ motion to vacate the decision.”¹

In a novel decision, the United States Court of Appeals for the Third Circuit held, in its ruling In re Emoral, Inc., 740 F.3d 875 (3d Cir. 2014), that personal injury claims of individuals allegedly harmed by a bankrupt debtor’s products cannot be asserted against a pre-petition purchaser of the debtor’s assets, as they are “generalized claims” which belong to the debtor’s bankruptcy estate rather than to the individuals who suffered the harm.

Background

In the recent case of Davis v. Elliot Mgmt. Corp. (In re Lehman Bros. Holdings Inc.), 2014 U.S. Dist. LEXIS 48102 (S.D.N.Y. Mar. 31, 2014), the District Court for the Southern District of New York issued a decision barring reorganization plans from paying legal fees of individual members of official creditors’ committees absent a showing of substantial contribution to the estate.

Senior Counsel Greg Laughlin discusses the legislative steps being taken to prevent future large-scale government bailouts of distressed financial institutions. From implementation of the Dodd-Frank Act to the introduction of the PATH Act in the U.S. House of Representatives, efforts are underway to end bailouts by placing greater emphasis on private capital solutions that diminish the need for taxpayer dollars.

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The Spanish Insolvency Act has seen its most material amendment come into effect on 9th March 2014 by Royal Decree - Law 4/2014 . The law now provides for a more flexible system and reduces equity leverage. Under the new law, it is now possible for a Refinancing Agreement  (which satisfies the legal requirements for such agreement) to be court approved in a Court Homologation process which will bind dissenting creditors. In practice, 75% of Syndicated Loan creditors can now bind the remaining 25%.              

(Ordonnance no. 2014-326) was published in the French official journal on 14 March 2014. The new rules apply to all proceedings that open on or after 1 July 2014 but will have an influence on current loan negotiations.  It redresses the checks and balances in place by creating a double-edged sword over the heads of shareholders by reallocating rights to lenders and by enhancing lender led restructurings.

This article was originally published in the January 2014 issue of Pratt's Journal of Bankruptcy Law.

Preference actions are common in bankruptcy cases. These actions seek to claw back payments made by a debtor to a creditor during the 90 days before the commencement of a bankruptcy case.

On January 14, 2014, Judge Robert E. Gerber of the United States Bankruptcy Court for the Southern District of New York in Weisfelner v. Fund 1. (In re Lyondell Chemical Co.), Adv. Proc. No. 10-4609 (REG), 2014 WL 118036 (Bankr. S.D.N.Y. Jan.

In Simon v. FIA Card Services, N.A.,[1] the U.S.