Federal Deposit Insurance Corporation (“FDIC”) Chair Martin Gruenberg gave remarks to the Cities for Financial Empowerment Fund 2023 Bank On National Conference yesterday in which he said that the FDIC “shares the Bank On movement’s commitment to advancing Americans’ economic inclusion in the banking system.”

In years past defaulting lender mechanics in a subscription credit facility may have been viewed as boiler plate language and, in most cases, the relevant provisions have not received much attention. In light of recent events in the banking industry, defaulting lender provisions have gained some renewed attention. In this article we take a look at the current general state of defaulting lender provisions and the impacts on the lender and borrower.

What Happened

In a ruling issued just yesterday, MOAC Mall Holdings LLC v. Transform Holdco LLC et al., 598 U.S. ----, 2023 WL 2992693 (2023) (“MOAC”), the United States Supreme Court (the “Supreme Court”) held that Bankruptcy Code section 363(m) is not jurisdictional in terms of appellate review of asset sale orders, but rather, that such section only contains limitations on the relief that may be afforded on appeal. Section 363(m) of the Bankruptcy Code is often relied upon by purchasers of assets in a bankruptcy case as providing finality to any sale order.

On March 14, 2023, Judge Ashely M. Chan of the U.S.

Since 1993, decisions out of the U.S. Bankruptcy Court for the Southern District of New York consistently adopted the aggregate “rent approach” for calculating lease rejection damages in bankruptcy proceedings. But in Bankruptcy Judge Wiles’ recent decision in In re Cortlandt Liquidating LLC, he departed from the “rent approach” in favor of the “time approach,” which is based on the time remaining under the lease rather than factoring in the total or aggregate rent still owed under the lease.

As many parties expected, on March 17, 2023 SVB Financial Group (“SVB Financial” or the “Debtor”) the holding company for Silicon Valley Bank, commenced a case under chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the Southern District of New York. Judge Martin Glenn has been assigned to the chapter 11 case. Neither Silicon Valley Bank, currently in FDIC receivership, nor its successor Silicon Valley Bridge Bank, N.A. (“SV Bridge Bank”), were included in the chapter 11 filing.

A lot of ink has been spilled in the last 72 hours regarding the historic developments involving Silicon Valley Bank and Signature Bank. Our quick summary of the facts and law is below. Cadwalader will continue to monitor these developments closely and will update you with additional insights.

Executive Summary:

In the past six months, four major players in the crypto space have filed for chapter 11 bankruptcy protection: Celsius Network, Voyager Digital, FTX, and BlockFi, and more may be forthcoming. Together, the debtors in these four bankruptcy cases are beholden to hundreds of thousands of creditors. The bulk of the claims in these cases are customer claims related to cryptocurrency held on the debtors’ respective platforms. These customer claimants deposited or “stored” fiat currency and cryptocurrencies on the debtors’ platforms.