In a May 4, 2015, decision, the U.S. District Court for the Southern District of New York rejected secured lenders’ appeals of a controversial bankruptcy court decision confirming the Chapter 11 plan of reorganization of MPM Silicones, LLC (also known as “Momentive”). The district court opinion, by Judge Vincent Briccetti, affirms the bankruptcy court’s decision that Momentive’s senior secured lenders could be “crammed down” at a below-market interest rate, without payment of a make-whole premium.

Following huge trading losses and the discovery of alleged fraud in a Singaporean subsidiary, O.W. Bunker & Trading A.S. filed for bankruptcy on 7 November 2014in the Danish court, just seven months after the company floated on the stock market.  Since then, a number of other O.W. Bunker Danish and overseas entities have also filed for bankruptcy.

Last month, the United States Court of Appeals for the Third Circuit issued an important, 28-page opinion that confirmed a jury verdict, holding former officers and directors of a not-for-profit health care provider in bankruptcy, jointly and severally liable to the facility’s creditors – in the amount of $2.25 million – for breach of fiduciary duty in failing to properly oversee and manage the non-profit entity.  Official Comm. of Unsecured Creditors ex rel. Lemington Home for Aged v. Baldwin (In re Lemington Home for Aged), No.

On February 6, 2015, Judge Francisco Besosa of the U.S. District Court for the District of Puerto Rico held that the Puerto Rico Public Corporation Debt Enforcement and Recovery Act (the “Recovery Act”) is expressly preempted by section 903 of the Bankruptcy Code and is therefore unconstitutional.

Europe's latest legislative response to the recent financial crisis — the Bank Recovery and Resolution Directive (BRRD) — is intended to establish a minimum common toolbox for regulators in each member state to address bank solvency issues sooner, maintain key financial functions and minimize the impact of any failure.

The BRRD has to be implemented in each member state at the beginning of 2015 following its adoption by both the European Parliament and the Council of the EU, and it follows other measures to improve banks' capital structure in order to make failure less likely.

New York's position as a global financial center means litigants often have sought to use New York courts as a forum to enforce judgments or arbitration awards against foreign entities. In reality, the burden of enforcement proceedings often falls on third parties, such as financial institutions that hold (or are alleged to hold) the judgment debtor's assets.

In 2014, the health care industry continued to see a high level of M&A activity, with announced transactions approaching $440 billion globally by the end of November. In the United States, consolidation continues to occur in the hospital and health care services subsector, often involving distressed health care providers. For many distressed providers — often small and midsized hospitals and hospital systems — acquisition by a financially strong counterparty is the only way to survive.

The Court of Chancery of Delaware recently issued a noteworthy decision clarifying fiduciary duties and confirming business judgment rule protection for board-level business strategy decisions by directors of insolvent corporations.¹ Quadrant Structured Products Company v. Vertin, 102 A.3d 155 (Del. Ch. 2014).

Despite lower-than-average Chapter 11 activity in 2014, the legal landscape for distressed investors has continued to evolve, with significant legal developments in credit bidding, make-whole premiums and intercreditor agreements. By staying apprised of the evolving jurisprudence in these areas, distressed investors can mitigate risks that have foiled lenders in recent cases.

Credit Bidding

The Bankruptcy Code's so-called "cramdown" statute provides debtors with a significant tool that can be used to impose a reorganization plan upon recalcitrant secured lenders, subject to fulfillment of certain requirements. In particular, Section 1129(b) of the Bankruptcy Code allows a bankruptcy court to approve a debtor's reorganization plan over the objections of a secured creditor so long as the plan is "fair and equitable" to the creditor.