CLIENT PUBLICATION FINANCIAL RESTRUCTURING & INSOLVENCY | August 9, 2016 Not So Safe After All?

CLIENT PUBLICATION Financial Restructuring & Insolvency | August 9, 2016 Judge Chapman Flips the Script US Bankruptcy Court for the Southern District of NY Grants Noteholders’ Motion to Dismiss Based on Lehman’s Failure to State Claim With Respect to Flip-Clause Litigation On June 28, 2016, in what essentially was a clean sweep for the noteholder and trust certificate holder defendants (the “Noteholders”), the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) granted an omnibus motion to dismiss Lehman Brothers Special Financing, Inc.’s (“LBSF

In a June 3, 2016 decision¹ , the United States Bankruptcy Court for the District of Delaware (“the Bankruptcy Court”) invalidated, on federal public policy grounds, a provision in the debtorLLC’s operating agreement that it viewed as hindering the LLC’s right to file for bankruptcy. Such provision provided that the consent of all members of the LLC, including a creditor holding a so-called “golden share” received pursuant to a forbearance agreement, was required for the debtor to commence a voluntary bankruptcy case.

The Alberta Court of Queen’s Bench has released its highly anticipated decision in Redwater Energy Corporation (Re), 2016 ABQB 278 (“Redwater”).

Summary

In its recently issued decision in Husky International Electronics, Inc. v. Ritz, a 7-1 majority of the Supreme Court has clarified that intentionally fraudulent transfers designed to hinder or defraud creditors can fall within the definition of “actual fraud” under Section 523(a)(2)(A) of the Bankruptcy Code and can sometimes result in corresponding liabilities being non-dischargeable in a personal bankruptcy proceeding.¹

In a decision released April 27, 2016 in LBP Holdings Ltd. v. Allied Nevada Gold Corp., Justice Belobaba dismissed a motion by a representative plaintiff to add certain underwriters as defendants to a securities class proceeding. The defendant gold mining company, Allied Nevada, effected a secondary public offering financed as a "bought deal" by two underwriters.

Financial institutions need to be mindful of the effect of the engagement of financial advisors with respect to their special loan clients.

In a March 29, 2016 decision,1 the United States Court of Appeals for the Second Circuit (the "Court of Appeals") held that creditors are preempted from asserting state law constructive fraudulent conveyance claims by virtue of the Bankruptcy Code's "safe harbors" that, among other things, exempt transfers made in connection with a contract for the purchase, sale or loan of a security (here, in the context of a leveraged buyout ("LBO")), from being clawed back into the bankruptcy estate for distribution to creditors.

The Supreme Court of Canada today released its highly anticipated decision in Iona Contractors Ltd. v Guarantee Company of North America, 2015 ABCA 240 dismissing the application for leave to appeal by the Trustee in Bankruptcy (the "Trustee") of the bankrupt, Iona Contractors Inc. ("Iona").