This past Monday, July 26, marked passage of the most recent major milestone in the replacement of LIBOR as the benchmark USD interest rate. Following the recommendation of the CFTC’s Market Risk Advisory Committee (MRAC) Interest Rate Benchmark Reform Subcommittee, on July 26, 2021 interdealer brokers replaced trading in LIBOR linear swaps with SOFR linear swaps. This switch is a precursor to the recommendation of SOFR term rates. The switch does not apply to trades between dealers and their non-dealer customers.
Distressed transactions in bankruptcy court have become big business. Sales under Section 363 of the bankruptcy code provide predictability and reliability (in the form of a court order delivering “free and clear” assets) under even the most turbulent of circumstances. Commonly known simply as “363 sales,” these transactions can provide an opportunistic purchaser with significant upside under the right circumstances. But the truly opportunistic buyer will need to buckle up and be prepared to move with lightning speed in a highly competitive and transparent forum.
Though bankruptcy filings are down in 2021, the expiration of the Paycheck Protection Program and reopening of the courts nationwide could lead to a rise in bankruptcy filings with many businesses still struggling to cope with the economic and supply chain aftereffects of the pandemic and consumer purchasing habits. These bankruptcies, in turn, will have an inevitable ripple effect on creditors and other claimants, whose abilities to collect on claims and exercise rights, are significantly restricted by the automatic stay.
On June 10, the Federal Trade Commission (FTC) filed an amended complaint for civil money penalties and other relief under Section 5 of the FTC Act prohibiting “unfair or deceptive acts or practices” and Section 521 of the Gramm-Leach-Bliley Act (GLBA) prohibiting the use of fraudulent statements to obtain consumer information.
On June 17, 2021, President Biden signed Senate Bill 475 into law, making “Juneteenth” a federal holiday. Because June 19th (tomorrow) falls on a Saturday this year, the day will be observed by federal government offices on June 18, 2021 (today).
This new law, revising the list of federal holidays in the U.S. Code, will affect consumer credit lenders’ operations. It is important for lenders to review their processes to determine how this new holiday will impact their operations.
We previously discussed the Court's decision in Yukon (Government of) v Yukon Zinc Corporation, 2020 YKSC 16, which opened the door to partial termination of agreements in a receivership, an action generally considered to not be permitted in the past.
The Court of Appeal for Ontario's decision in Dal Bianco v Deem Management Services Limited, 2020 ONCA 585 [Dal Bianco] is the most recent pronouncement on resolving procedural conflicts between the Bankruptcy and Insolvency Act, RSC, 1985, c B-3 (BIA) and provincial enactments.
The common law anti-deprivation rule is alive and well in Canada, the Supreme Court of Canada held in an 8-1 decision in Chandos Construction Ltd. v Deloitte Restructuring Inc., 2020 SCC 25 [Chandos].
On September 2, 2020, the Fifth Circuit declined to void a fee award of nearly $2.3 million in favor of an employer that had prevailed on its trade secret theft claim against its former employee, because the employee willfully failed to comply with the bankruptcy court’s “extremely explicit” order regarding his objections to the award.
Background
It has long been the law that termination of contracts is permissible under the Companies' Creditors Arrangement Act (CCAA) and Bankruptcy and Insolvency Act (BIA) with the effect of the termination being to create an unsecured claim for damages in place of the contract. What has not been permitted is allowing insolvent companies to pick and choose parts of an agreement to terminate. Following a recent decision arising out of receivership proceedings in the Yukon, it may now in some circumstances be possible to terminate parts of an agreement.