There are important issues and procedures to be considered when a foreign buyer seeks to purchase the assets of a U.S. entity that is distressed or subject to a U.S. insolvency proceeding and which is involved in business activities with a nexus to U.S.

Secured creditors need to be aware of recent bankruptcy rulings that affect their rights and interests. These rulings have tested the boundaries of key concepts affecting the ability to "cramdown" and involuntarily restructure a secured creditor’s rights and the valuation of collateral. Secured creditors must therefore be mindful of these developments and risks in guiding their negotiating and litigation strategy against a cramdown threat.

The recent decision in BNY Corporate Trustee Services Limited v Eurosail - UK 2007 - 3BL PLC (Eurosail) has provided helpful guidance on the interpretation of the insolvency tests set out in section 123 of the Insolvency Act 1986. This guidance is not only relevant to companies with financial problems. The common practice of drafting contractual events of default by reference to section 123 means that it has significance to anyone who is creating or is party to contracts (whether finance documents or other commercial contracts) containing this type of provision.

Comfort letters can be a useful tool for providing an assurance of support from a parent to a subsidiary company. In some cases they help inform the decision of the board of a subsidiary and its continuing trade. It's possible for such letters to form binding obligations in law, if carefully considered and drafted.

In its decision published on March 13, 2013 (dated February 21, 2013 – IX ZR 32/12), the German Federal Court of Justice (BGH or Bundesgerichtshof) made it clear that it will uphold its prevailing case law regarding two questions at hand even though the relevant legal provisions relating to equitable subordination have been moved from the corporate law regime to the insolvency law regime with the 2008 Act to Modernize the Law on Private Limited Companies and Combat Abuses (MoMiG or Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Mißbräuchen).

In an earlier edition of Fully Secured (June 27, 2012 – Volume 3, Number 2), we reported on the Ontario Court of Justice decision in Snoek ⁷ where security granted by a borrower (“HSLP”) to a group of individual creditors (“B”) was held to constitute an improper preference and declared invalid following a challenge by the trustee in bankruptcy. B had been one victim of a Ponzi scheme involving numerous unsecured creditors of HSLP.

Sale at an undervalue; time for presenting a petition; implied term avoids manifest injustice; complying with time limits; order for sale threshold; Wragge & Co's finance litigation experts bring you the latest on the cases and issues affecting the lending industry.

Sale at an undervalue

In Butterfield Bank (UK) Ltd v Philip and others, the bank sought summary judgment against four guarantors of a bank facility. It was alleged that the bank had sold a property at a £500,000 undervalue.

Recently, on the eve of closing a large mortgage loan for a regional mall intended for a single asset securitization, it was determined that there was an extremely remote risk that the mortgage might not be foreclosable due to a peculiarity of the improvements on the real property and local foreclosure practices.

Numerous public-private partnerships have been formed in recent years as a device for funding infrastructure projects such as ports, toll roads and other transportation projects, sewer systems and parking garages. State and local governments, which have been strapped for cash to spend on infrastructure projects, have granted private entities the right to operate various infrastructure projects in exchange for a significant up-front payment and/or periodic payments.

On January 17, 2013, the United States Bankruptcy Court for the Southern District of New York decided that American Airlines (American) was not obligated to pay certain make-whole premiums set forth in some of its loan indentures at the time that American refinanced the applicable loans. A makewhole premium typically allows a lender to be compensated for having to reinvest in a lower interestrate environment when a borrower prepays its debt before the original maturity date.