Section 8 of the Interest Act (Canada) (the Act) was considered by the Ontario Superior Court of Justice in Grant Forest Products Inc. (Re) in the context of an inter-creditor dispute.
In Re Indalex Limited, the OCA surprised insolvency, pension and financial services professionals by ruling that pension plan deficiency claims can have priority over the claims of DIP lenders in the context of Companies’ Creditors Arrangement Act proceedings.
On Thursday, December 1, 2011, a three-judge panel of the Supreme Court of Canada granted leave to appeal from the decision of the Court of Appeal for Ontario in Re Indalex.
On October 31, the MF Global enterprise collapsed into bankruptcy and a number of related insolvency proceedings. Amid allegations of improper commingling of customer accounts and rumors of misbegotten proprietary Eurobond trades, two unregulated entities – MF Global Finance USA Inc. and MF Global Holdings Ltd. (the Unregulated Debtors) – filed voluntary bankruptcy petitions on October 31, 2011. Later the same day, the Securities Investor Protection Corporation filed a complaint in the U.S.
It will be almost Christmas before we know, at least for portfolio companies that can file in the Delaware Bankruptcy Court. The case that will provide guidance is Friendly Ice Cream Corp., where Sun Capital, which is both equity owner and term lender, put Friendly into Chapter 11 on October 5, 2011. It did so after agreeing to a Section 363 purchase agreement with Friendly that would allow a Sun affiliate to buy assets (including desirable lease locations) free and clear by credit bidding outstanding pre-petition term debt owed to Sun.
A recent opinion by the U.S. District Court for the Southern District of New York affirms a 2010 ruling by the Lehman Brothers bankruptcy court, which rendered certain netting and setoff provisions unenforceable in bankruptcy. The core holding – that a counterparty cannot offset pre-petition and post-petition amounts – should come as no surprise to market participants.
On January 25, 2011, Lehman Brothers filed an amended version of its plan of liquidation (the Plan). Contrasted against its predecessor version, the Plan creates some winners and some losers in terms of the percentage of projected payouts to creditors of various Lehman entities. More important than the percentage distribution, however, may be the means by which the debtors seek to fix a creditor’s claim amount. With regard to claims based on derivatives contracts, Lehman proposes to take a novel – and for holders of those claims, potentially alarming – approach.
After months of negotiations and conferences among key legislators, President Obama signed into law a final version of regulatory reform legislation on July 21, 2010. More than 2,000 pages long, the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the Act) provides new legal guidelines for both “financial companies” and non-financial companies and instructs federal agencies to develop a myriad of regulations to enforce the concepts provided in the Act.
In an interesting twist on a run-of-themill case regarding the personal liability of a corporate officer for unremitted sales taxes, the New York State Division of Tax Appeals held an owner (“Petitioner”) personally liable for sales tax even though the corporation was in Chapter 11 bankruptcy and was being run by a bankruptcy court-approved management company. In re Eugene Dinino, Docket Nos. 822605, 822606, 822607, 822608, 822609, 822610 (N.Y.S. Div. of Tax App. June 24, 2010).
The U.S. Bankruptcy Court for the Southern District of New York recently issued an opinion in the case of In re Lehman Brothers Holdings Inc. that significantly restricts the scope of setoff rights for energy traders and other participants in derivatives and forward commodity markets. Traditionally, bankruptcy law has required mutuality between the debtor and a creditor as a prerequisite for the exercise of setoff rights by the creditor.