The U.S. Court of Appeals for the Third Circuit, in In re Philadelphia Newspapers LLC,1 has ruled that secured creditors do not have a right, as a matter of law, to credit bid their claims when their collateral is sold under a plan of reorganization. The Third Circuit held that secured creditors may be barred from credit bidding where a debtor's reorganization plan provides secured creditors with the "indubitable equivalent" of their secured interest in the assets. The court's ruling follows a similar ruling last year by the U.S.

The United States’ Bankruptcy Court for the District of Delaware has recognised the liquidation of a Cayman company, Saad Investments Finance Company (No5) Limited (“SIFCO5”) (an SPV established to operate as an investment company), as a “foreign main proceeding” under Chapter 15 of the United States’ Bankruptcy Code.

Recognition of the liquidation as foreign main proceedings provides for an automatic stay of proceedings with respect to any assets of SIFCO5 within the United States, amongst other things.

Recently, various national title insurance companies, such as First American Title Insurance Company and the entire Fidelity National Title Group—which includes Chicago Title Insurance Company, Fidelity National Title, Ticor Title, Lawyers Title, Commonwealth Land Title, Security Union Title and Alamo Title—officially announced that, effective immediately, creditors' rights coverage will no longer be available by endorsement, affirmative coverage, issuance of the American Land Title Association (ALTA) 1970 policies or otherwise. This change affects both owner's and loan policies.

New ground was broken last December in the British Virgin Islands when what is believed to be the first scheme of arrangement procedure under the BVI Business Companies Act, 2004 (BCA) was completed.

In the scheme of arrangement Amber Petroleum Ltd (Amber) completed a successful reverse takeover of AIM-listed AfNat Resources Limited (formerly Lithic Metals and Energy Limited) (AfNat) under section 179A of the BVI Business Companies Act, 2004 (BCA).

On 15 September 20091 the judge responsible for the Lehman bankruptcy proceedings in the United States held that Metavante Corporation (“Metavante”) could not rely on Section 2(a)(iii) of the ISDA Master Agreement to suspend payments to Lehman Brothers Special Financing, Inc. (“LBSF”). Specifically, Judge Peck held that the safe harbour provisions in the US bankruptcy code protected a non-defaulting party’s contractual rights to liquidate, terminate or accelerate swaps and to net termination values but did not provide a basis to withhold performance under a swap if it did not terminate.

The facts behind Mr. Justice Lewison’s recent judgment in Stanford (STANFORD INTERNATIONAL BANK LIMITED [2009] EWHC 1441 (Ch)) have no direct connection with either the British Virgin or Cayman Islands but lawyers there do have particular reason to note the more general principles around the seemingly vexed but important issue of COMI in the context of multi-jurisdictional insolvency.

A recent application to the British Virgin Islands courts has sought to blur the lines between directors’ general duties to act for the benefit of an insolvent company’s creditors, and the statutory clawback associated with unfair preferences entered into in the twilight period prior to a company going into liquidation.

In recognition of the new BVI Commercial Court, Harneys is publishing quarterly Commercial Court case notes which summarise some of the more important judgments delivered by the Court.

Appropriation

The British Virgin Islands has opened a new Commercial Court which will specialise in cross-border commercial and insolvency matters. In two ceremonies earlier this month, the government of the BVI formally opened the court and signed a memorandum of understanding with the Eastern Caribbean Supreme Court (ECSC) for its operation and administration.

On February 23, 2009, Pennsylvania became the second state to recognize an "ordinary course of business" exception to preference actions brought under a state insolvency statute where the defense is not expressly provided for in the statute. In Joel S. Ario, Insurance Commissioner of the Commonwealth of Pennsylvania, in His Official Capacity as Liquidator of Reliance Insurance Company, Appellant v. H.J. Heinz Company, H.J. Heinz Company, L.P., H.J. Heinz Finance Company, and Portion Pac, Inc., et al., Appellees, No. 21 MAP 2006 (Pa. Feb.