For the fashion industry, one of the must-have, but hard to come by, items this season is a favorable refinancing deal. The recent volatility in the fashion market has reflected not just the ever-changing tastes of the cognoscenti, but also the rapidly shifting economic landscape confronting designers and retailers. The fashion industry has suffered acutely in the global financial crisis as consumers curb their spending, particularly in the luxury goods market. In fact, analysts have estimated that 12% of fashion companies will not survive the recession.
In a decision made on August 11, 2009, the U.S. Bankruptcy Court for the Southern District of New York allowed solvent, special purpose entity subsidiaries of a bankrupt parent company, General Growth Properties, Inc., to maintain their Chapter 11 bankruptcy cases, raising several important issues related to the use of special purpose entities structured to be "bankruptcy-remote."
GGP Business Model and 2009 Bankruptcy Filings
The Ninth Circuit Court of Appeals held on July 27, 2009 in Boucher v. Shaw that individual managers of a bankrupt corporation can be held liable to the corporation's former employees for unpaid wages under the federal Fair Labor Standards Act ("FLSA").
In Biltmore Assocs., LLC v. Twin City Fire Insurance Co., 2009 WL 1976071 (9th Cir.
On June 10, 2009, the sale of substantially all of Chrysler's assets closed, just 42 days after the country's third largest automaker filed for bankruptcy protection. The closing followed a contentious sale hearing before the Bankruptcy Court, an expedited appeal to the Second Circuit Court of Appeals and a brief stay imposed by the United States Supreme Court. The source of the contention: three Indiana state pension funds, arguing that the sale of Chrysler's assets constituted a sub rosa plan of reorganization that upended the priority scheme of the Bankruptcy Code.
Citing a slowdown in its business caused, in part, by the recent global credit crunch, Sea Launch has filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Based in Long Beach, California, Sea Launch is owned by Boeing (40%) and by foreign partners that include RSC-Energia of Russia, Kvaener ASA of Norway, and SDO Yuzhnoye/PO Yuzhmash of the Ukraine. In addition to operating its seagoing launch platform in the equatorial waters of the Pacific Ocean, the company has started offering landbased launches from the Baikonur Space Center in Kazakhstan.
On August 30, 2008, the United States District Court for the District of Northern Texas issued its ruling on whether Americas Mining Corporation (“AMC”) (and its parent Grupo Mexico) had caused ASARCO LLC (“ASARCO”), a wholly owned subsidiary of Grupo Mexico, to fraudulently transfer stock of Southern Peru Copper Company (“SPCC”) from ASARCO to AMC. The Court determined that AMC was liable for (1) intentional fraudulent transfer, (2) aiding and abetting breach of fiduciary duty under New Jersey law; and (3) civil conspiracy under Arizona law. See ASARCO LLC v.
New tax rules relating to the tax treatment of certain corporate restructuring transactions are expected to be finalized soon by the PRC Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”).
On April 8, the Second Circuit Court of Appeals reversed the Bankruptcy Court and concluded that special ERISA “termination premiums” due PBGC are not contingent prepetition claims subject to discharge in a chapter 11 reorganization. Pension Benefit Guar. Corp. v. Oneida, Ltd., 2009 WL 929528 (2d Cir. April 8, 2009), rev’g Oneida Ltd. v. Pension Benefit Guar. Corp., 383 B.R. 29 (Bankr. S.D.N.Y., 2008).
With bankruptcy filings up by more than 25% in the recent past, and with the promise of many more to come in the near future, an increasing number of businesses and individuals may find themselves listed amongst the largest unsecured creditors of a debtor and with much to lose in a bankruptcy case. As one of the largest creditors, these same businesses and individuals may also find themselves being solicited to serve on “official” unsecured creditors’ committees.