The Bankruptcy Appellate Panel for the Sixth Circuit Court of Appeals1 recently issued an opinion of importance in bankruptcy cases involving commercial real estate as the debtor’s only asset, such as a shopping center or office building.

Parent company guarantees and performance bonds are typically used in the construction and engineering industries to provide a developer with some security in the event that the contractor breaches the building or engineering contract or, in some circumstances, upon the contractor's insolvency.

In the current economic climate, contractor default is, unfortunately, even more prevalent in the construction and engineering industries, and so the issues surrounding parent company guarantees and performance bonds are very much in focus for developers.