Beginning on September 15, 2008, Lehman Brothers Holdings Inc. (“LBHI”) and 16 of its affiliates (the “Debtors”) filed voluntary Chapter 11 bankruptcy petitions with the United States Bankruptcy Court for the Southern District of New York. The resulting bankruptcy cases are jointly administered by the bankruptcy court for procedural purposes (collectively, the “Chapter 11 Proceeding”), but to date, the Debtors remain separate legal entities.  

On 6 November 2008, the Belgian House of Representatives adopted a bill on the continuity of companies. Although the Senate has exercised its right to examine the bill and may propose amendments until 26 January 2009, we thought it useful to go ahead and address this new bill, which will replace the Act of 17 July 1997 on composition with creditors (Wet op het gerechtelijk akkoord/Loi sur le concordat judiciaire).

As our economy slides into what could be a long and severe recession, retail bankruptcies are expected to increase. Landlords are presented with a myriad of problems when one of their tenants files for bankruptcy. Although many of the obligations and rights of landlords are well established by current bankruptcy law, a novel question arises when a tenant files for bankruptcy while a landlord is in the process of constructing tenant improvements or is on the verge of providing a tenant allowance. Given the tenant’s right to reject its lease, a landlord is faced with a difficult decision.

On November 14, 2008, a letter was sent to derivatives counterparties of Lehman Brothers Holdings Inc. and its affiliates (collectively, “Lehman”) notifying them of Lehman’s Motion to Settle or Assign Derivative Contracts. The letter concerns a motion filed in the bankruptcy court by Lehman Brothers Debtors on November 13, 2008, which seeks to establish two procedures relating to its pre-petition derivative contracts with counterparties.

On November 1 2007 the State Commission for Insolvency Law presented the Preliminary Bill for an Insolvency Act to the minister of justice. The most important changes to the existing Bankruptcy Act are outlined in this update.

On September 15, 2008, Lehman Brothers Holdings Inc. filed a voluntary petition for bankruptcy protection, commencing the largest bankruptcy case in U.S. history. Initially, it appeared that many of the operating subsidiaries would remain outside of bankruptcy, but during the past several days, many of them have filed bankruptcy petitions as well. As of this writing, a complete list of the bankrupt Lehman entities (collectively, “Lehman”) is as follows:

Many clients have asked us for guidance as to the basic mechanics of dealing with the Lehman bankruptcy. Although this list is not exhaustive, we have set forth below some of the issues that you may want to think about. (This guidance is with respect to transactions entered into under the 1992 ISDA Master Agreement, and capitalized terms used herein are defined in that agreement.

This update discusses an issue that may arise in relation to the recognition of foreign bankruptcies where the law of the receiving state does not provide for admittance proceedings. This issue recently arose in the Yukos proceedings.

Facts

In Monday’s 7-2 decision in Florida Department of Revenue v. Piccadilly Cafeterias, Inc., the Supreme Court of the United States held that the exemption from state transfer and stamp taxes in Section 1146(a) of the Bankruptcy Code does not apply to transfers that take place prior to the time the Bankruptcy Court confirms a reorganization plan. Section 1146(a) had been cited by bankruptcy debtors and their asset purchasers in seeking tax exemptions for Section 363 sales and other pre-confirmation transfers.

A recent decision out of a North Carolina bankruptcy court has reopened the question of whether a physical supply contract may qualify as a forward contract or swap agreement for purposes of the Bankruptcy Code. Although previous U.S. case law determined that those terms included commodity supply agreements, the U.S. Bankruptcy Court for the Eastern District of North Carolina disagreed.