The House of Representatives passed the Financial Institution Bankruptcy Act of 2014 (H.R. 5421) on December 1, 2014.  The bill, if enacted, would add provisions to the U.S. Bankruptcy Code, including a new "subchapter V" of chapter 11, under which "covered financial institutions" would be eligible to be debtors in a chapter 11 bankruptcy case.   

Singularis Holdings Limited v PricewaterhouseCoopers [2014] UKPC 36

PricewaterhouseCoopers v Saad Investments Company Limited [2014] UKPC 35

The Privy Council gives credence to the concept of “modified universalism” (being the court’s common law power to assist foreign winding up proceedings) and notes some of the circumstances which would permit a “stranger” to a winding up order the opportunity to challenge that order.

The facts:

German insolvency law, unlike US insolvency law, only recently introduced (in 2012) the so-called protective shield proceedings (Schutzschirmverfahren) to enable potentially illiquid and/or over-indebted debtors to restructure the company on the basis of a so-called insolvency plan. Thereby, the liquidation of a company by a future insolvency administrator can be avoided.

First in a Series of Articles on Bankruptcy Issues

For many investors, business bankruptcy is a mysterious black box that chews up investor and creditor value and then spits out assets or, occasionally, a reorganized operating company. In this series of articles, we are going to open up that box and shed some light on the processes of bankruptcy. After all, you never know what business will file next. It is best to have some understanding of the nature of the game – and to be as well-armed as possible.

November 10, 2014, is the deadline for filing proof of claims with the Office of the Special Deputy Receiver in Illinois regarding the estates of Lumbermens Mutual Casualty Company, American Manufacturers Mutual Insurance Company and American Motorists Insurance Company. Those insurance companies are all part of the Lumbermens Mutual Group and were formerly known as Kemper. They entered liquidation on May 10, 2013.

In its October 1, 2014 decision in Quadrant Structured Prods. Co. v. Vertin, et al., C.A. No. 6990, the Delaware Court of Chancery applied the protections afforded under the business judgment rule to investment strategies adopted by directors of insolvent corporations. The court held that the business judgment rule barred derivative claims asserted against directors by a creditor who had alleged that the company’s high-risk investment strategy was implemented for the purpose of benefitting the corporation’s controller at the creditors’ expense.

Loan agreements and bond indentures often contain "make-whole" provisions, which provide yield protection to lenders and investors in the event of a repayment prior to maturity. They accomplish this by requiring the borrower to pay a premium for pre-payment of a loan. This allows lenders to lock-in a guaranteed rate of return when they agree to provide financing. Borrowers also benefit since the yield protection allows lenders to offer lower interest rates or fees than they would absent such protection.

On July 16, 2014, the Uniform Law Commission (the “Commission”) approved a series of discrete amendments to the Uniform Fraudulent Transfer Act (the “UFTA”) and renamed it the Uniform Voidable Transactions Act (the “UVTA”). The UVTA is intended to address inconsistency in the courts, better harmonize with the Bankruptcy Code and the Uniform Commercial Code (the “UCC”), and provide litigants with greater certainty in its application to a fraudulent transfer action.

Originally appeared in the August 2014 issue of The Bankruptcy Strategist.

Lenders and their attorneys are conditioned to believe that being over-secured is as good as life gets for a creditor.  Lenders want to secure repayment with collateral that is valuable and liquid, while their attorneys ensure that the security interest is properly perfected.  But, post-closing confidence in a job well done can quickly evaporate if the borrower files a bankruptcy case intending to sell the collateral.