Given the spate of bankruptcies filed over the last few years, including by large-scale tenants such as Borders, Linens 'n Things, and Circuit City, and the tenuous financial condition of big-box retailers such as Best Buy, it is important for both landlords and tenants to understand the benefits and limitations of bankruptcy protection as it relates to the status of a bankrupt tenant’s leasehold interest.
In somewhat related news, in two recent New York Supreme Court rulings, judges upheld the validity of “bad boy” guarantees that included as non-recourse exceptions or “bad boy” acts under the guarantee a voluntary bankruptcy filing by the borrower.
On May 14, 2012, in 9-Ball Interests Inc. v. Traditional Life Sciences Inc.1, the Ontario Superior Court of Justice (the "Court") rendered another decision that demonstrates the importance of full disclosure and transparency in applications made to the Court.
A year after the uncertainty created in the Canadian corporate debt financing world by the Ontario Court of Appeal's pensions-friendly decision in the Indalex CCAA restructuring matter2, the Quebec Superior Court, in April 2012, determined in a lengthy and well-reasoned decision that the key restructuring and pensions law principles underpinning Indalex do not apply in Quebec when considering the treatment of defined benefit amortization payment and deficit claims in a restructuring.
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In Canada legislative authority is divided between the federal and provincial governments by subject matter. "Bankruptcy and insolvency" is a matter of federal jurisdiction, while "property and civil rights" is generally within the jurisdiction of the provinces.
On September 13, 2011, the Federal Deposit Insurance Corporation approved a final rule requiring certain financial institutions to prepare a plan for their dismantling in the event of material financial distress or failure.
In a recent decision1 involving TerreStar Networks, Inc., and its affiliates (“TerreStar” or the “Debtors”), the United States Bankruptcy Court for the Southern District of New York held that the Debtors’ noteholders held a valid lien on the economic value of a license granted to TerreStar by the Federal Communications Commission (“FCC”) and that nothing in Article 9 of the New York Uniform Commercial Code (the “NYUCC”) or Section 552 of the Bankruptcy Code invalidated that lien.
Although originating from equity, declared but unpaid dividends have historically been treated as debt claims by courts in proceedings under the Companies’ Creditors Arrangement Act (CCAA).1 Following the coming into force of the CCAA amendments in September 2009, a fresh look at the characterization of claims as debt or equity is being undertaken.
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On April 7, 2011, the Ontario Court of Appeal rendered a decision in the restructuring proceedings involving Indalex Limited (Indalex) under the Companies’ Creditors Arrangement Act (CCAA) that is inconsistent with prior non-binding comments by the same court relating to the priority of certain pension claims. The decision has material implications for institutional financiers that lend against the inventory, accounts receivable or cash collateral of businesses with Ontario regulated defined benefit pension plans and for the access of those businesses to secured credit.