On May 29, 2012, the Supreme Court ruled 8-0 that a debtor could not confirm a plan over a secured creditor’s objection if the plan provided for the sale of the secured creditor’s collateral free and clear of liens, but did not provide the secured creditor with the option of credit-bidding at the sale. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166, 2012 U.S. LEXIS 3944 (U.S. May 29, 2012). Such a plan, the Supreme Court held, does not meet the statutory requirements for “fair and equitable” treatment of an objecting secured class in 11 U.S.C. § 1129(b)(2)(A).

On April 6, 2011, the Ontario Superior Court of Justice released its decision in the priority disputes between the lessors and aviation authorities resulting from the Skyservice receivership. The Court, in interpreting and applying the decisions in Canada 3000 and Zoom, raised the bar for lessors to defeat the seizure and detention rights of the aviation authorities in Canada.

Yes, on the facts in the Chapter 11 proceedings involving Borders, the insolvent bookseller.

Jefferies & Company, an investment bank, was retained by Borders to pursue reorganisation strategies, including a possible sale of the company’s assets as a going concern. The bank made considerable efforts in flogging the assets, which resulted in an offer from an interested party, but an actual sale of assets did not happen. Jefferies nevertheless claimed the liquidation fee under its agreement with Borders. The company’s creditors opposed this: no sale, no success fee.

In January and February of 2012, Justice Morawetz of the Ontario Superior Court of Justice (Commercial List) released two decisions¹ in which he authorized a debtor-in-possession (“DIP”) financing charge, an administration charge, and a directors and officers (“D&O”) charge ranking ahead of, among other claims, possible pension deemed trusts over the objection of the debtor companies’ unions and on notice to the members of the companies’ pension administration committees.

In the recent decision of the Supreme Court of Canada in Toronto-Dominion Bank and Her Majesty the Queen (2012 SCC 1), the Supreme Court succinctly agreed with the reasons of Justice Noël of the Federal Court of Appeal.

In the recent matter Wilmington Trust Natl. Assn. v. Vitro Automotriz, Index No. 652303/11 (N.Y. Sup. Dec. 5, 2011), Justice Bernard J. Fried of the Commercial Division addressed the obligations of guarantors of indentured notes. Regardless that the issuer of the notes had declared bankruptcy in Mexico, the guarantors, none of whom were co-debtors, were not relieved of their obligations under the notes.

In Wells Fargo Bank Northwest v. US Airways, Inc., 2011 NY Slip Op 52188(U) (Sup. Ct. N.Y. County Dec. 1, 2011), Justice Bernard J. Fried held that a liquidated damages provision requiring payment of a holdover fee equal to twice the monthly rent was reasonable and did not function as a penalty under New York contract law. The case arose from three aircraft sale and leaseback transactions, pursuant to which Defendant US Airways, Inc. (“US Airways”), sold to Plaintiff Wells Fargo Bank Northwest (“Wells Fargo”), and Wells Fargo leased back to US Airways, three Boeing 737 aircraft.

In the decision of Justice Morawetz of the Ontario Superior Court of Justice (Commercial List) (the “Court”) in In the Matter of Aero Inventory (UK) Limited and Aero Inventory PLC, the Court held that proceeds of a fraudulent preference action recovered by a trustee in bankruptcy under section 95 of the Bankruptcy and Insolvency Act (“BIA”) may be subject to the rights of secured creditors, to the extent secured creditors had rights in the collateral in question at the time of the impugned transaction.

In the recently released Judgment in Bank of Montreal v. Peri Formwork Systems Inc.¹, the British Columbia Court of Appeal was called upon to decide whether a Monitor, under the Companies’ Creditors Arrangement Act (“CCAA”)², or a Receiver, under the Builders Lien Act ³, could borrow monies to complete a development project in priority to claims of builder’s liens registered against the project.

Rayford Homes granted security to two lenders, its trustee shareholder and the Bank of Scotland (BoS). The parties entered into an intercreditor agreement (ICA) using the BoS standard form. In a schedule to that agreement was a definition of the term ‘BoS Priority’ over ‘BoS Debt’ up to a monetary limit. The amount was not filled in, nor was the term ‘BoS priority’ actually used in the ICA.