Trillions of dollars of securities are issued on the strength of bankruptcy remoteness and special purpose entities (“SPVs”) intended to be bankruptcy remote. These transactions generally involve hundreds of millions of dollars and investors’ expectations that the SPVs will not be dragged into a potential bankruptcy filing of their non-SPV affiliates.
In a recent opinion, the Bankruptcy Court for the District of Maryland dealt with a conflict between the strong presumption in favor of enforcing arbitration agreements and the Bankruptcy Code’s emphasis on centralization of claims. Based on an analysis of the two statutory schemes and their underlying policies and concerns, the Court decided to lift the automatic stay to allow the prepetition arbitration proceeding to go forward with respect to non-core claims.
Background
A recent decision has got the funding community talking and would, if times were different, have led to some water cooler moments. The decision is a mere 19 paragraphs long and, as will become evident, is perhaps as important for what it did not say as for what it did say.
On 28 June 2021, the English High Court handed down a judgment declining to sanction a restructuring plan proposed by Hurricane Energy PLC, which sought to cram down the dissenting class of shareholders and hand over the control of the company to its bondholders with a debt-for-equity swap diluting the shareholders down to 5% of their existing shareholding. This is the first time that the English court has declined to sanction a restructuring plan (since their introduction almost a year ago in June 2020), and only the fourth time that the cross-class cram down mechanism has been used.
The application of sovereign immunity principles in bankruptcy cases has vexed the courts for decades. The U.S. Supreme Court’s opinions on the matter have not helped much. Although they have addressed the issue in specific contexts, they have not established clear guidelines that the lower courts may apply more generally. The Third Circuit took a crack at clarifying this muddy but important area of the law in the case of Venoco LLC (with its affiliated debtors, the “Debtors”).
Background
A defendant’s bankruptcy filing need not spell doom for a plaintiff’s case. In fact, bankruptcy court is an attractive forum for plaintiffs in many ways.
Federal equity receivers frequently lack the resources necessary to pursue litigation against individuals and entities that have defrauded or manipulated consumers and investors. As a result, they often utilize contingent fee arrangements, which can deprive a receivership estate of a significant portion of a recovery, usually taking 30 percent to 50 percent of an award or settlement.
The United States Bankruptcy Court for the Southern District of Texas recently clarified the administrative expense standard applicable to indenture trustees by holding that they can recover fees and expenses as administrative expenses only when they make a “substantial contribution.” This standard requires a greater showing than “benefit to the estate,” which is the general administrative expense standard. In re Sanchez Energy Corp., No. 19-34508 (Bankr. S.D. Tex. May 3, 2021).
Background
Turns out, it depends on who you ask. Judge Bernstein said no. Recently, Judge Glenn said yes, but only for causes of action that resemble actual fraudulent transfers. It is unusual for the bankruptcy judges in Manhattan to disagree with each other, so let’s take a look at the issue.
Background
In a first, the Bankruptcy Court for the Southern District of New York in the Arcapita Bank case had to decide whether Shari’a compliant investment agreements, providing for Murabaha and Wakala transactions, qualify for the safe harbor protections provided in the bankruptcy code for securities contracts, forwards and swaps. The court held that they do not. Since the opinion runs about 100 pages long, we attempt to distill some very basic facts concerning Shari’a compliant transactions and point to important holdings made by the court.
Shari’a Compliant Transactions