In a widely followed dispute, the Fifth Circuit Court of Appeals will soon render a decision on the appeal of a Texas Bankruptcy Court’s refusal to recognize non-debtor third party releases in the Mexican reorganization proceeding (concurso mercantil) of Mexican glass manufacturer Vitro SAB de CV. Wall Street and the capital markets will be watching this appeal closely as a reversal of the Bankruptcy Court would likely make lenders and bondholders extremely nervous about extending future credit to Mexican corporations.

ASIC has made a brand new start to the way insolvency notices will be published in Australia. From 1 July 2012 the previous obligations for publications have melted away.

In Deephaven Distressed Opportunities Tradings, Ltd. v. 3V Capital Master Fund Ltd., Index No. 600610/08 (Sup. Ct., NY County, Jun. 26, 2012), Judge Melvin L. Schweitzer denied the plaintiffs’ motion for summary judgment on its damages claims. The case arose from a dispute over the trade of distressed claims in the Sea Container, Inc. bankruptcy. Deephaven and 3V Capital executed trade confirmations that would convey “allowed” claims to 3V Capital subject to a negotiated assignment agreement. The parties signed confirmations on three trades, two of which led to this dispute.

In Skov v. U.S. Bank N.A., 2102 WL 2549811 (June 8, 2012), the Court of Appeal reversed the trial court’s decision to sustain a demurrer against plaintiff Andrea Skov’s second amended complaint, holding that she had stated a claim for violation of Civil Code Section 2923.5, which requires a lender to contact a defaulted borrower to discuss alternatives to foreclosure before starting a nonjudicial foreclosure by recording a notice of default.

While the winding up of a company is a last resort in the context of shareholder oppression, the discretion to order a winding up will be exercised by the Courts if the circumstances dictate that it is the most appropriate remedy, such as where it will provide finality and certainty for the shareholders without undermining the value of the company’s projects to a potential purchaser on winding up.

On June 28, 2012, Stockton, California became the most recent municipality to file for bankruptcy under chapter 9, after having concluded a mandatory mediation process with its creditors. See, In re City of Stockton, California, Case No. 12-32118 (Bankr. E.D. Cal.). Many parties affected by a potential filing by other similarly situated California public entities are seeking to understand the process that precedes a Chapter 9 filing and how to plan for a possible filing.

ASIC’s new administrative powers to wind up companies strengthens the remedial measures that can be taken against business operators attempting to avoid liabilities by abandoning companies and should help employees access their entitlements.

The Corporations Amendment (Phoenixing and Other Measures) Act 2012 (Cth) (Act) will commence on 1 July 2012. 

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).

The Corporations Amendment (Phoenixing and Other Measures) Bill 2012 (Cth) was introduced into Federal parliament on 15 February 2012.

The Bill proposes to amend theCorporations Act 2001 (Cth) and contains 2 key sets of measures:

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.