The U.K. government is proposing to reintroduce preferential status to certain taxes in U.K. insolvencies beginning 6 April 2020. If enacted:

• certain taxes owed to HM Revenue & Customs (HMRC) would rank ahead of floating charges in U.K. insolvencies;
• the legislation would be retroactive, applying to such tax liabilities incurred at any time prior to insolvency; and
• it is likely to have a significant impact on asset-based loans (ABLs) involving U.K. obligors.

Introduction

In Mission Product Holdings, the Supreme Court Endorses “Rejection-as-Breach” Rule and Interprets Broadly the Contract Rights that Survive Rejection

On May 20, 2019, the U.S. Supreme Court ruled in Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___, that a debtor’s ability to reject executory contracts under Section 365(a) of the Bankruptcy Code does not permit the debtor to rescind trademark licenses. In concluding that trademark licensees cannot unilaterally be deprived of their rights to use a debtor’s mark, the Court resolved a long-standing circuit split that the International Trademark Association had referred to as “the most significant unresolved legal issue in trademark licensing.”

Last year, the Supreme Court issued its decision in Merit, unanimously ruling that a buyout transaction between private parties did not qualify for “safe harbor” protection under Bankruptcy Code section 546(e), on the basis that a “financial institution” acted as an intermediary in the overarching transaction.

A recent decision from the U.S.

On March 18, 2019, Judge Stuart M. Bernstein of the United States Bankruptcy Court for the Southern District of New York issued a decision enforcing a mortgage lender’s claim for a prepayment premium (a/k/a make-whole or yield maintenance premium) notwithstanding the lender’s prepetition acceleration of the loan due to the debtor’s default.

On February 25, 2019, the U.S. Court of Appeals for the Second Circuit vacated the bankruptcy court’s dismissal of avoidance actions brought by Irving Picard, the trustee (Trustee) for the liquidation of Bernard L.

We are all accustomed to seeing change of control as a mandatory prepayment event, if not an event of default, under subscription line facilities. Even the strongest sponsors accept that a lender’s analysis of a transaction is based on the current management of the fund, such that any change in control should trigger at least the right to prepayment and cancellation. While there are often points for negotiation, this premise is almost universal.

In 2017, the U.S. Court of Appeals for the Second Circuit held in In re MPM Silicones, LLC that the appropriate interest rate for replacement notes issued to secured creditors under a “cramdown” Chapter 11 plan must be a market rate if an “efficient market” exists. If no such market exists, however, the formula rate (effectively, the prime rate plus 1-3 percent) must be applied.

On November 30, 2018, Judge Nelson S. Román of the United States District Court for the Southern District of New York issued a decision affirming the dismissal of certain claims brought by senior secured creditors against junior secured creditors concerning the alleged breach of standstill and turnover provisions in an intercreditor agreement that governed the creditors’ relationship as creditors with recourse to common collateral. SeeIn re MPM Silicones, LLC, No. 15-CV-2280 (NSR), 2018 WL 6324842 (S.D.N.Y. Nov. 30, 2018) (“Momentive”).